UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


SCHOOL  OF  LAW 
LIBRARY 


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AlERICM 
LAW  AND  PROCEDURE 


VOLUMES  I  TO  XII  PREPARED  UNDER  THE 
EDITORIAL  SUPERVISION  OF 

JAMES  PARKER  HALL,  A.B.   LL.B. 

Dean  of  Law  School,  University  of  Chicago 

ANC 

VOLUMES  XIII  AND  XIV  BY 

JAMES  DeWITT  ANDREWS,  LL.D. 

FORMERLY  OF  THE  LAW  FACULTY 
MORTHWESTERN  UNIVERSITY 

Author  of  "Andrews'  American  Law,"   Editor  "Andrews' 

Stephens'  Pleading,"  "Cooley's  Blackstone," 

"Wilson's  Works,"  etc. 


A  Systematic,  Non-Technical  Treatment  of  American 

Law  and  Procedure,  Written  by  Professors  and 

Teachers  in  Law  Schools,  and  by  Legal 

Writers  of  Recognized  Ability. 


PUBLISHED  BY 

LA  SALLE  EXTENSION  UNIVERSITY 
CHICAGO 

1917 


AMERICAN  LAW  AND  PROCEDURE 

VOLUME  I. 

PREPARED  UNDER  THE  EDITORIAL  SUPERVISION  OF 

JAMES   PARKER  HALL,  A.B.,  LL.B. 

Dean  of  the  University  of  Chicago  Law  School 

INTRODUCTION  BY 
JAMES  PARKER  HALL,  A.B.,  LL.B. 


CONTRACTS 

BY 

HARRY  SANGER  RICHARDS 

Ph.B.,  LL.D.  (State  University  of  Iowa) 

LL.B.  (Harvard  University) 

Dean  of  College  of  Law,  University  of  Wisconsin 


QUASI-CONTRACTS 

BY 

WALTER  WHEELER  COOK 

A.B.,  A.M.  (Columbia  University),  LL.M.  (Columbia  University) 
Professor   of  Law,  Yale   University 


AGENCY 


BY 


CHARLES  ANDREWS  HUSTON 

A.B.  (University  of  Chicago),  J.D.  (University  of  Chicago) 
Dean  of  Law,  Leland  Stanford,  Jr.,  University 


COPYRIGHT,  1910,  1911.  1912,  1913,  1915 


BY 


LaSAlle  extension  university 


^, 


.V 


<tM^  '-'°'' 


CONTENTS 


Prefatory  Note. 


.1 


INTRODUCTION. 


CHAPTER  I. 
Law:    Its  Meaning,  Sources,  and  Classiflcation. 

SECTION    1. 

What  is  Law? 

§  1.  Varying  uses  of  the   word   "law" ▼_ 

§  2.  Laws   of   God '^ 

§  3.  Moral    laws ^ 

§  4.  Laws   of  nature '^] 

§  5.  Laws  of  logic  and  esthetics vii 

§  6.  Economic   laws 7"^ 

§  7.  Law  as  a  rule  of  hunaan  conduct  enforced  by  the  state is 

§  8.  Suggested  qualifications  of  this ^ 

SECTION    2. 

Sources  of  Law. 

§    9.    Custom    ^. 

§  10.    Same :      Illustrations ^] 

^  11.    Adjudication  as  a  source  of  law xii 

§  12.    Legislation  as  a  source  of  law ^^^ 

SECTION    3. 
Classification  of  Law. 

§  13.    Analytical    classifications ^^ 

§  14.    Practical    classifications ^'^ 

§  15.    The  common  law ^^ 

CHAPTER  n. 
Outline  of  English  Legal  History. 
§  16.    Roman  and  English  law.    Scope  of  chapter xviii 

SECTION    1. 

Early  influences  affecting  English  Law. 

§  17.    Britains   and  Romans ^^ 

§  18.    Anglo-Saxons  and  Danes ^^ 

§  19.    The    Normans i "^ 


CONTENTS 

SECTION    2. 

Development  of  English  Law  from  Henry  II  to  American  Independence. 

§  20.  Early  modes  of  trial ^xii 

§  21.  Trial  by  jury xxii 

§  221.  Legal  reforms  of  Henry  II xxiv 

§  23.  Magna   Charta xxv 

§  24.  Legislation  of  Edward  I xxvi 

§  25.  Legislation  of  Henry  VIII xxviii 

§  26.  The  Stuart  period xxix 

§  27.  The    eighteenth    century xxx 

§  28.  Growth  of  judge-made  law xxx 

SECTION    3. 
Courts  of  Equity. 

§  29.     Original  theoiy  of  king's  courts xxxi 

§  30.     Early  development  of  court  of  chancery xxxii 

§  31.     Contest  between  chancery  and  common  law  courts xxxiii 

§  32.     Development  of  equity  jurisdiction xxxiv 

§  33.     Function  of  equity xxxv 

SECTION    4. 

Other  English  Legal  Systems. 

§  34.     Admiralty  law.    Canon  law.    Law  merchant xxxvii 

SECTION    5. 
Classical  Legal  Literature. 

§  35.  .Early  legal  literature:     Glanville  and   Bracton xxxviii 

§36.     Same:     Year  Books.    Littleton's  Tenures xxxix 

§  37.     Lord    Coke xl 

§  38.     Blackstone    xli 

CHAPTER  in. 
Use  of  Judicial  Precedents. 

§  39.  Occasion  and  mode  of  judicial  law-making xlii 

§  40.  Same:     Illustration xliii 

§41.  Judicial   precedents   ordinarily   followed xlv 

§42.  How  far  decisions  create  precedents.    Illustrations xlvi 

§  43.  Same :      Conclusion xlviii 

§  44.  Same:     Several  questions  in  a  case xlviii 

§  45.  Same :      Dicta xlix. 

§  46.  When  precedents  may  be  overruled xlix 

§  47.  Precedents  from  other  jurisdictions 1 

§  48.  How  precedents  are  collected  and  cited li 

§  49.  Statutes liii 


CONTENTS 


CONTRACTS. 


CHAPTER  I. 
Preliminary  Topics, 

SECTION    1. 

Classification  of  Rights. 

§     1.     Absolute  and  relative  rights 1 

§     2.     Classification  of  relative  rights 2 

SECTION    2. 

Historical  Development   of   Contracts. 
§    3.    Primitive  law 3 

SECTION    3. 

Classification  of  Contracts. 

§     4.     Contracts    and   quasi-contracts 4 

§     5.     Formal  and  informal  contracts 4 

§     6.     Express  and  implied  contracts 5 

§     7.     Executed  or  executory  contracts 5 

§     8.     Bilateral  and  unilateral  contracts 6 

PART  I. 

FORMATION  OF  CONTRACTS. 

CHAPTER  II. 
Offer  and  Acceptance. 

§    9.     Contract   defined 7 

§  10.     Agreement  must  contain  a  promise 7 

§  11.     Promise  must  be  enforceable  in  law 8 

§  12.     Motive  is  not  material 8 

§  13.     Meeting   of   minds 9 

§  14.     When  a  knowledge  of  terms  of  offer  is  presumed 11 

§  15.     Actual  meeting  of  minds  not  required 12 

§  16.     Offer  must  be  communicated 12 

§  17.    Where  the  contract  arises 13 


CONTENTS 

f  18.    Acceptance  must  be  communicated 15 

§  19.    Mere  silence  not  an  acceptance 15 

§  20.    Wihen  actual  receipt  of  acceptance  is  neccessary 16 

§  21.    Acceptance  must  be  responsive  to  offer 17 

§  22.    Notice  of  acceptance.     Unilateral  contracts 18 

§  23.    By  whom  offer  must  be  accepted 19 

§  24.     Certainty  of  terms :    Advertisements  as  offers 19 

§  25.    When  advertisement  is  an  offer 20 

§  26.    Clear  evidence  of  intent  to  make  an  offer  is  required 21 

§  27.  Binding  force  of  agreement  preliminary  to  formal  contract  22 

§  28.    Acceptance  must  be  in  the  terms  of  the  offer 23 

§  29.    Effect  of  counter  offer 24 

§  30.    Revocation  of  the  offer 24 

§  31.  Revocation  where  offer  is  to  remain  open  for  a  definite  time.  25 

§  32.    Options    26 

§  33.    Revocation  of  offers  to  public 26 

§  34.    When  revocation  is  communicated 26 

§  35.     Termination  by  lapse  of  time 27 

§  36.    Period  of  offer  determined  by  the  subject  matter 28 

§  37.    Answer  by  return  mail 29 

§  38.    Effect  of  death 29 

I  39.    Effect  of  insanity 30 

CHAPTER  in. 

Consideration. 

§  40.    Consideration 32 

§  41.     Origin  of  doctrine 33^ 

§  42.    Motive    and   consideration , 34 

§  43.    Adequacy   of  consideration 36 

§  44.    Benefit  to  the  promisor 37 

§  45.    Illusory   promises 37 

§  46.    Consideration  void  in  part 38 

§  47.    Subscription  contracts 39* 

§  48.    Composition  with  creditors 41 

§  49.  Performing  or  promising  to  perform  a  contract  obligation.  42 

§  50.    Same :    Apparent  exceptions  to  the  rule 44 

§  51.    Promises  to  third  persons 45 

§  52.    Performance  of  a  non-contract  obligation 47 

§  53.    Forbearance  or  compromise  of  a  claim 48 

§  54.    An  actual  claim  must  be  presented 5Q 

§  55.    Forbearance  to  sue 50 


CONTENTS 

§  56.  Past   consideration 52 

§  57.  Same :     Apparent  exception  to  the  rule 53 

§  58.  Moral  consideration 55 

§  59.  Same :    Apparent  exceptions  to  the  rule 55 

§  60.  Action  on  the  original  contract 57 

§  61.  Original  obligation  void 57 

CHAPTER  IV. 

Contracts  under  Seal.    Parties. 

§  62.  Definition    59 

§  63.  Seal.     Form  and  signature 59 

§  64.  Delivery.      Escrow 60 

§  65.  Consideration    60 

§  66.  Other  modifications  of  the  old  rvdes 61 

§  67.  Disabilities  limiting  contractual  capacity 62 

§  68.  Insane  persons  and  idiots :     English  rule 62 

§  69.  Same :     American  rule 63 

§  70.  Where  insanity  is  known 63 

§  71.  When  the  contract  is  void 64 

§  72.  Monomania  and  lucid  intervals 64 

§  73.  Drunkards    65 

§  74.  Infants    66 

§  75.  Married  women 66 

§  76.  Corporations    66 

CHAPTER  V. 

Statute  of  Frauds. 

§  77.    Policy  of  the  statute 68 

§  78.     Provisions  of  the  statute 69 

§  79.     Special  promise  by  executor  or  administrator  to  pay  out 

of  his  own  estate 70 

§  80.    Promise  to  answer  for  the  debt,    default    or    miscarriage 

of    another 70 

§  81.     Agreements  in  consideration  of  marriage 71 

§  82.     Contracts  for  the  sale  of  land,  tenements,  etc 71 

§  83.  Agreements  not  to  be  performed  within  the  space  of  a  year  72 
§  84.     Same:    Performance  contingent  on  an  uncertain  event. ...  72 

§  85.     Contracts  for  the  sale  of  goods,  wares  and  merchandise 74 

§  86.    The  memorandum 74 


CONTENTS 

PART  II. 

OPERATION  OF  CONTRACTS, 

CHAPTER  VI. 

Joint  and  Several  Contracts.    Alternative  Contracts. 

§  87.    Joint  or  several  liability 75 

§  88.     Joint    contracts 76 

§  89.     Survivorship    76 

§  90.    Joint  and  several  obligations 76 

§  91.     Contracts  performable  in  the  alternative 78 

CHAPTER  VII. 
Rights  and  Liabilities  of  Third  Persons. 

SECTION   1. 

Bight  of  a  Beneficiary  under  a  Contract  to  Which  He  Is  Not  a  Party, 

§  92.     General   doctrine.     Lawrence  v.  Fox 81 

§  93.     Must  benefit  to  third  person  be  intended? 82 

§  94.     Mere  incidental  benefit  insufficient 83 

§  95.    Limitations  upon  Lawrence  v.  Fox  in  New  York 84 

§  96.     Rescission  by  the  parties  to  the  contract 84 

§  97.     Defences  to  suit  by  third  party 85 

§  98.    Election  of  remedies 85 

§  99.     Real  party  in  interest 86 

§100.     Proper  basis  of  the  rule 88 

SECTION    2. 
Assignment   of   Contracts. 

§101.    General  doctrine 87 

§102.     Suit  in  name  of  assignor 87 

§103.     What  claims  are  assignable 88 

§104.     Same :     Personal  service 89 

§1 05.     Same :     Future   interests 90 

§106.     Same:     Contracts  non-assignable  in  terms 90 

§107.     Same :    Public  policy 90 

§108.    Prerequisites  of  a  valid  assignment.- 91 

§109.     Notice  to  the  debtor 91 

§110.     Successive   assignments 92 

§111.     Partial   assignments 92 

§112.     Negotiable    contracts 93 

§113.     Assignments  by  operation  of  law 94 

§114.     Rights  of  the  assignee 94 


CONTENTS 

CHAPTER  Vin. 
Interpretation  and  Construction  of  Contracts. 

§11 5.     Scope  of  subject 96 

§116.    Problem  of  interpretation 96 

§117.     Rules  of  interpretation 97 

§118.     Oral  contracts 97 

§119.     Written  contracts 97 

§120.     Parol  evidence  rule 97 

§121.     Dependent  or  independent  promises 98 

§122.     Independent   promises 99 

§123.     Dependent  promises 100 

§124.     Time  for  performance 100 

§125.     Where  act  on  one  side  requires  time 101 

§126.     Where  one  act  is  to  be  done  first 101 

§127.     Test  of  mutual   dependency 102 

§128.     Contracts  conditional  on  satisfaction 102 

§129.     Notice  of  facts  upon  which  performance  depends 103 

§130.     Implied  conditions    104 

§131.    Where  the  consideration  is  not  apportioned 105 

§132.     Installment  contracts 106 

§133.     Same:      Illustrations 107 

§134.  When  the  right  of  action  accrues.    Anticipatory  breach.  ..109 

CHAPTER  IX. 

Remedies  for  Breach  of  Contract. 

§135.     Available  remedies 112 

§136.     Money    damages 112 

§137.     Specific  performance 112 

§138.     Money  damages :  Details  of  the  remedy 113 

PART  in. 

DISCHARGE  OF  CONTRACTS. 

CHAPTER  X. 
Discharge  by  Act  of  the  Parties. 

SECTION    1. 

Rescission. 

§139.    By  mutual  agreement 114 

§140.     Dependent  relative  rescission 115 

§141.    Rescission  for  a  default  under  the  contract 115 


CONTENTS 

SECTION  2. 

Release. 

§142.    Release    115 

§143.    Covenant  not  to  sue  as  a  release 115 

SECTION    3. 
Accord  and   Satisfaction. 

§144.    Accord  and  satisfaction :     Unilateral 116 

§145.     Same :      Bilateral 116 

§146.    Equitable  relief 117 

§147.     Conditional    satisfaction 117 

§148.     Instruments  under  seal 117 

§149.    Accord  and  satisfaction  by  implication 118 

SECTION    4. 
Novation. 

§150.    Definition 118 

§151.     Substitution  of  parties 119 

§152.     Substitution  of  creditors 120 

CHAPTER  XI. 
Illegality. 

§153.    Illegal   contracts 122 

§154.    Gaming  contracts 123 

§155.     Commercial    wagers 123 

§156.     Insurance  contracts  as  wagers 124 

§157.     Furtherance  of  illegal  purpose 124 

§158.    Agreements  in  restraint  of  trade 125 

§159.    Valid  restraints :    Trade  secrets 125 

§1G0.     Same:    Goodwill 125 

§161.     Statutory    prohibitions 127 

§162.    Rule  in  the  absence  of  statute 127 

§163.  Agreements  tending  to  defeat  the  administration  of  justice: 

Stifling  prosecution 128 

§164.     Same :    Exceptions  to  above  rule 128 

§165.     Same :     Champerty    129 

§166.     Same :     Maintenance 129 

§167.     Agreement  to  influence  public  officials 130 

§168.     Restraint  of  marriage 131 

§169.     Contracts  to  defraud  third  persons 131 

§170.     Sunday   contracts 132 

§171.     The  effect  of  illegality 132 

§172.    Where  the  contract  is  divisible 132 


CONTENTS 

§173.  Where  the  act  is  highly  immoral 133 

§174.  Acts  forbidden  or  penalized  by  statute 134 

§175.  Intention   of  parties   immaterial 134 

§176.  Right  of  innocent  party 135 

§177.  Negotiable  paper  given  for  illegal  purposes 135 

§178.  Parties  not   in  equal  fault 136 

§179.  Where  the  illegal  purpose  is  not  consummated 137 

§180.  Recovery  from  a  stakeholder 137 

§181.  Conflict  of  laws 138 

CHAPTER  XII. 
Impossibility. 

§182.     Risk  of  loss 139 

§183.    Absolute    impossibility    139 

§184.     Impossibility  known  to  one  party  only 139 

§185.     Subsequent    impossibility 140 

§186.    Acts  of  God 141 

§187.    Impossibility  known  to  delinquent  party 142 

§188.     Contract  dependent  on  the  existence  of  a  particular  thing.  143 

§189.    Acts  of  law 144 

§190.    Acts  of  war 146 

§191.     Increased   expense    146 

§192.     Alternative    contracts 147 

§193.     Impossibility  occasioned  by  act  of  the  party 147 

§194.     Rights  of  parties  where  contract  can    not    be    performed 

on  account  of  impossibility 147 

CHAPTER  XIII. 
Mistake. 

§195.     Mutual   mistake    150 

§196.     Mistake  by  one  party 151 

§197.     Mistake  as  to  identity  of  a  party 151 

§198.     Mistake  known  to  the  other  party 151 

§199.    Mistake  as  to  form 152 

CHAPTER  XIV. 
Improper  Conduct  Inducing  the  Contract. 

§200.     Non-disclosure    of   facts 153 

§201.     Affirmative    misrepresentations 154 

§202.     Distinction    between    effect    of    misrepresentation    and    of 

fraud    155 

§203.    What  is  a  false  statement?   155 


CONTENTS 

§204.  Statements  of  law 156 

§205.  Effect  of  fraud 157 

§206.  Undue  influence  and  duress :    In  general 157 

§207.  Undue  influence :     Special  cases 158 

§208.  Effect  of  undue  influence  and  duress 158 

QUASI-CONTRACTS. 

CHAPTER  I. 
The  Nature  of  Quasi-Contractual  Obligations. 
§     1.     Historical    connection    of    quasi-contract    with    forms    of 

pleading    160 

Its  extension  by  Lord  Mansfield 162 

Quasi-contracts  distinguished  from  true  contracts 163 

Definition  of  quasi-contract 165 

A  record  gives  rise  to  a  quasi-contract 165 

A  statutory  duty  may  give  rise  to  a  quasi-contract 166 

An  official  duty  may  give  rise  to  a  quasi-contract 167 

Unjust  enrichment  the  basis  of  most  quasi-contracts 167 

CHAPTER  II. 
Waiver  of  Tort. 

Meaning  of  * '  waiving  the  tort. " 169 

Conversion  and  sale.     Measure  of  recovery  is  amount  re- 
ceived   171 

§  11.     The  quasi-contract  arises    when    the    money    is    received. 

Statute  of  limitations 172 

§  12.     Money  or  its  equivalent  must  be  received 173 

§  13.     Conversion  and  no  sale;    May  tort  be  waived? 175 

§  14.     Same :      Illustrations 176 

§  15.     Same :     Conclusion 177 

§  16.    Recovery  in  quasi-contract  for  use  of  personal  property. .  .178 

§  17.     Same :      Illustrations 179 

§  18.    Recovery  for  use  of  real  property 180 

§  19.     Same :     Measure  of  recovery 182 

§  20.    Recovery  of  fees  or  salary  of  public  office 183 

§  21.     Recovery  for  services  illegally  obtained 184 

§  22.     Recovery  for  services  of  apprentice  enticed  away 185 

§  23.     Recovery  for  benefits  conferred  under  invalid  marriage ....  186 
§  24.     Right  to  recover  benefits  conferred    under    sale    rescinded 

for   fraud 187 

§  25.    Election  of  remedies 189 


§ 

2. 

§ 

3. 

§ 

4. 

§ 

5. 

§ 

6. 

§ 

7. 

§ 

8. 

§ 

9. 

§ 

10. 

CONTENTS 

CHAPTER  III. 
Recovery  for  Benefits  Conferred  without  a  Contract. 

SECTION    1. 

Recovery  of  Money  Paid  under  Compulsion. 

§  26.     No  recovery  if  parties  are  *'in  pari  delicto." 191 

§  27.     Transaction  illegal  on  account  of  statute  for  protection  of 

plaintiff    192 

§  28.     Money  paid  under  duress  of  goods 193 

§  29.     Money  paid  under  compulsion  of  legal  process 195 

§  30.     Money  paid  under  a  judgment 197 

§  31.     Money  paid  to  prevent  illegal  seizure  for  taxes 198 

§  32.     Money  paid  in  discharge  of  a  duty 199 

§  33.     Contribution  between  joint  wrong-doers 201 

§  34.     Same :    Where  recovery  is  allowed 201 

§  35.    Contribution  between  co-contractors 203 

SECTION    2. 
Recovery  for  Benefits  Conferred  without  Request. 

§  36.    Where  plaintiff  intends  to  benefit  defendant 204 

§  37.     Same :     Saving  property 205 

§  38.    Benefits  conferred  at  request  of  third  party 206 

§  39.     Improvements  made  in  good  faith  upon  another's  land.... 207 
§  40.    Recovery  for  services  rendered  by  a  supposed  slave 2tt8 

CHAPTER  IV. 
Recovery  for  Benefits  Conferred  under  a  Contract, 

SECTION    1. 

Benefits  Conferred  under  a  Mistake  of  Law. 

§  41.    Distinction  between  law  and  fact 210 

§  42.    Mistakes    of    law 210 

SECTION    2. 

Benefits  Conferred  under  a  Mistake  of  Fact. 

§  43.     Mistake  of  fact  as  to  existence  of  contract 212 

§  44.     Mistake  as  to  the  subject  matter  of  the  contract 213 

§  45.     Mistake  as  to  the  title  of  seller :    Personal  property 214 

§  46.    Same :     Real  property 215 

SECTION    3. 

Plaintiff  in  Default  under  a  Contract. 

§  47.    Wilful    default 216 

§  48.     Inexcusable  but  not  wilful  default 217 

§  49.    Performance   impossible 217 


CONTENTS 

§  50.    Plaintiff  to  plead  the  statute  of  frauds 219 

§  61.    Performance   illegal 220 

SECTION    4. 

Defendant  in  Default  under  a  Contract. 

§  62.    Defendant  wilfully  or  inexcusably  in  defaidt 221 

§  53.    Performance    impossible 223 

§  64.    Defendant  able  to  plead  the  statute  of  frauds 224 

§  56.    Performance   illegal .225 

CHAPTER  V. 
Qnasi-Contractnal  Obligations  in  the  Law  of  Persons. 

§  56.    Liability  of  infant  for  necessaries 227 

§  57.    Liability  of  insane  person  for  necessaries 227 

§  68.    Liability  of  husband  for  wife's  necessaries 228 

I  69.    Liability  of  father  for  necessaries  furnished  child 329 


AGENCY. 

CHAPTER  L 
Fundamental  Conceptions. 

§    1.    The  function  of  agency 230 

§    2.    Agent  and  servant :    Definitions 231 

§    3.    Responsibility  for  the  agent's  act 231 

§    4.    Personal  character  of  the  relation 232 

§    5.    Purposes  for  which  an  agency  may  be  created 232 

§    6.    The  parties  involved  in  the  relation 233 

PART  I. 
TH£  RELATION  AS  BETWEEN  PRINCIPAL  AND  AGENT. 

CHAPTER  II. 
The  Formation  of  the  Relation. 

SECTION    1. 

Competency  of  the  Parties. 

§    7.  Capacity  to  act  as  principal 235 

§    8.  Same :    Infants  as  principals 235 

§    9.  Same:     Married  women 236 

§  10.  Same:    Insane  persons 236 

§  11.  Same:    Corporations 237 

§  12.  Same:     Partnerships 237 

§  13.  Same :     Unincorporated  associations 237 


CONTENTS 
§  14.    Capacity  to  act  as  agent 2!38 

SECTION    2. 

Formation  of  the  Relation  by  Prior  Agreement. 

§  15.    Essentials  of  the  relation 238 

§  16.    Implied    assent 239 

§  17.    Gratuitous    agency 240 

SECTION    3. 

Formation  of  the  Relation  by  Ratification. 

§  18.    Ratification :     Definition 240 

§  19.    Ratification  is  equivalent  to  prior  authorization 241 

§  20.    Ratification  is  irrevocable 242 

§  21.     Conditions  of  valid  ratification 242 

§  22.    Act  must  be  performed  for  existing  principal 242 

§  23.    Act  must  be  done  on  behalf  of  a  principal  disclosed  to  third 

party    243 

§  24.     The  principal  must  be  competent  to  do  the  act 244 

§  25.     Intervening  rights  of  strangers  must  be  respected 245 

§  26.    Intervening  rights  of  third  parties  must  be  respected 245 

§  27.    Transaction  cannot  be  ratified  in  part  only 246 

§  28.    Ratification  must  be  with  full  knowledge  of  fact 247 

§  29.    Ratification  may  be  expressed  or  implied 248 

SECTION   4. 
Formation  of  Quasi- Agencies  by  Operation  of  Law. 

§  30.    In  general 249 

§  31.    Agency  by  estoppel 250 

§  32.    Agency  by  necessity 250 

SECTION    5. 
Form  of  Appointment. 

§  33.    In  general  parol  appointment  sufficient 251 

§34.    Exceptions:     Statutes:     Sealed  instruments 251 

CHAPTER  III. 

Termination  of  the  Relation. 

§  35.  In   general 253 

§  36.  Termination  by  consent  of  principal  and  agent 253 

§  37.  Revocation  by  the  principal 254 

§  38.  Rights  of  the  agent  on  revocation 255 

§  39.  When  revocation  is  justified 255 

§  40.  What  constitutes  a  revocation 256 

§  41.  Necessity  of  notice  of  revocation 256 

§  42.  Renunciation  by  the  agent 258 


CONTENTS 

§  43.     Termination  by  operation  of  law:     Change  in  the  subject 

matter    259 

§  44.     Same :    Death  of  a  party  or  dissolution  of  a  corporation  or 

partnership    259 

§  45.     Same :    Various  changes  of  condition  of  one  of  the  parties.  .261 

§  46.     Irrevocable  agencies:     Powers  granted  for  the  protection 

of  the  agent 261 

§  47.     Same :    Powers  coupled  with  an  interest 262 

CHAPTER  IV. 
Obligations  of  Principal  to  Agent. 

SECTION    1. 

Obligation  to  Recompense. 

§  48.    Compensation  2*64 

§  49.     Reimbursement    265 

§  50.     Indemnity   266 

SECTION    2. 

Obligation   to   Protect. 

§  51.    Protection  from  injury :     In  general 266 

§  52.     Classification  of  duties 267 

§  53.     Duty  to  provide  a  safe  place  to  work 267 

§  54.     Duty   to  provide   and  maintain   safe   appliances   and   ma- 
chinery     268 

§  55.    Duty  to  inspect  and  repair 269 

§  56.     Duty  to  provide  a  sufficient    force    of    competent    fellow 

servants   271 

§  57.     Duty  as  to  rules 271 

§  58.     Duty  as  to  special  orders,  etc 272 

§  59.     The    servant's    right    to    rely    upon    performance    by    the 

master    273 

§  60.     Character  of  these  duties  cannot  be  delegated 274 

§  61.     Qualifications  of  the  rule :     In  general 274 

§  62.     Same:    Voluntary  assumption  of  the  risk  by  the  servant.  .274 

§  63.     Same :    What  assumption  is  involuntaiy 276 

§  64.     Same :     Contributory  negligence  of  the  servant 277 

SECTION    3. 

Exception  to  Obligation  to  Protect :  Fellow  Servant  Bule. 

§  65.     The  nature  of  the  fellow  servant  rule 277 

§  66.     Limitations  on  the  fellow  servant  rule:     Master  liable  if 

participating  in   the  injury 279 

§  67.     Same:  Master  liable  for  a  vice-principal's  wrong 279 


CONTENTS 

§  68.  The  superior  servant  doctrine 280 

§  69.  The  different  department  doctrine 281 

§  70.  Who  are  fellow  servants :    In  general 282 

§  71.  Same:    Servants  having  a  common  master 282 

§  72.  Same:    Servants  having  a  common  employment 284 

§  73.  Statutory'  modifications  of  the  fellow  servant  rule 284 

CHAPTER  V. 
Obligations  of  Agent  to  Principal 

§  74.     The  duty  of  obedience 286 

§  75.     Same :     Gratuitous  agents 286 

§  76.     Same :      Exceptions 287 

§  77.    Loyalty    288 

§  78.     Same:     Agent  cannot    make    personal    profit    out    of   his 

transactions    288 

§  79.     Same:     Agent  cannot  represent  both  parties 289 

§  80.     Care,  skill,  and  diligence :    Paid  agent 290 

§  81.     Same :     Gratuitous  agent 291 

§  82.     Accounting   291 

§  83.     Communication    291 

§  84,     Pei-sonal  discharge  of  his  functions  as  agent 292 

§  85.     Same :     Ministerial  acts 293 

§  86.     Same:  Delegation  customary  in  the  particular  business 293 

§87.     Consequences    of   a   permitted   delegation 294 

PART  II. 

THE  RELATION  AS  BETWEEN  PRINCIPAL  AND  THIRD 

PARTY. 

CHAPTER  YI. 
Principal's  Responsibility  for  Torts  of  Agent. 

§  S8.     Reason  for  holding  the  principal  responsible 295 

§  89.     Torts   actually   authorized 296 

§  90.     Torts    necessarily    or    usually    incident    to    an    authorized 

course  of  action 296 

§  91.     Unauthorized  torts   committed  in   the   course  of  the  ser- 
vant's emploj-ment   and  in  the  intended  furtherance   of 

the   master's   busmess 297 

§  92.     Same :     Wilful  acts 298 

§  93.     Same  (continued) 300 

8  94.     Same :    Fraud 300 

VoL  1—2 


CONTENTS 

§  95.     Special  liability  of  the  master  in  cases  of  contract  with  a 

third  party 301 

§  96.    Same :    Where  the  master  has  entrusted  a  dangerous  instru- 
mentality to  the  servant 302 

§  97.    Same :    Application  of  doctrine  to  frauds  of  agent 303 

§  98.    Exception  in  case  of  public  agencies 305 

§  99.    Master  not  liable  for  acts  of  independent  contractor 305 

§100.    Master  not  liable  for  torts  of  servant  temporarily  trans- 
ferred to  another  master 306 

§101.    Master  not  liable  for  torts  of  an  interloper 307 

CHAPTER  VII. 
Principars  Responsibility  for  Crimes  of  Agent. 

§102.     Civil  liability 308 

§103.     Criminal  liability:     In  general  liable  only  for  authorized 

acts  308 

§104.    Same :    Exceptions 309 

CHAPTER  VIII. 

Principal's  Responsibility  for  Contracts  Made  on 

His  Behalf  by  Agent. 

§105.    Division  of  subject 310 

SECTION    1. 

Contracts  Made  for  a  Disclosed  Principal. 

§106.    General  rule 310 

§107.     Extent  of  agent's  authority 310 

§108.     Authority  actually  conferred  binds  the  principal 311 

§109.     Forms  of  conferring  express  authority  and  their  construc- 
tion   311 

§110.    Incidental  authority:    In  general 312 

§111.     Same:     Where  the  principal  instructs  against  the  use  of 

incidental    authority 314 

§112.    Same:     Illustrations  of  authority  incident  to  the  nature 

of  the  agency 314 

§113.     Same :  Agents  to  sell 315 

§114.     Same :     Agents  to  purchase 315 

§115.     Same:    Agents  to  manage  a  business  or  property 316 

§116.     Same :     Factors 316 

§117.     Same:    Brokers    318 

§118.    Same :     Auctioneers  319 

§119.    Same :    Attorneys   at   Law 320 

§120.    Authority  by  estoppel 321 


CONTENTS 

§121.    Same :    Distinguished  from  incidental  authority 321 

§122.    Limits  of  principal's  liability 322 

§123.    Exceptions  to  the  rule  of  principal's  liability 323 

SECTION    2. 

Contracts  Made  on  Behalf  of  an  Undisclosed  Principal. 

§124.    In  general 324 

§125.    Liability  of  undisclosed  principal  for  contracts  made  by  his 


agent 


324 


§126.    Exceptions  to  liability  of  undisclosed  principal:     Written 

contracts    326 

§127.     Same:    State  of  accounts  between  principal  and  agent 327 

§128.    Same :     Third  party's  election 328 

CHAPTER  IX. 
Principal's  Responsibility  for  Statements  and  Knowledge  of  Agent. 

§129.     In    general 330 

§130.     Agent's  statements  as  to  the  fact  of  agency 331 

§131.     Agent's  statements  as  a  part  of  the  transaction 331 

§132.     Notice  to  the  agent  is  notice  to  the  principal 332 

§133.     Same :     Limitations  of  riile 333 

§134.    Notice  must  be  received  in  the  course  of  the  agency 334 

§135.     Notice  to  an  agent  adversely  interested  is  not  notice  to 

the  principal 335 

§136.    Notice  to  agents  of  corporations 336 

§137.    Notice  to  sub-agents 336 

CHAPTER  X. 
Principal's  Rights  Against  Third  Parties. 

§138.     In  general 338 

§139.     Rights  of  principal  against  third  party  in  tort 338 

§140.     Same:     Exceptions    339 

§141.     Same    (continued) 340 

§142.     Rights  of  principal  against  third  party  in  quasi-contract.  .341 
§143.     Rights  of  disclosed  principal  against  third  party  in  con- 
tract    341 

§144.     Same:  Rights  of  undisclosed  principal  against  third  party 

in   contract 342 

§145.     Same :    In  general  principal  can  recover 342 

§146.    Exceptions  to  rule:     State  of  accounts  between  agent  and 

third  party 343 


CONTENTS 

§147.     Same:     Negotiable  paper  and  sealed  instrument 344 

^148.     Same:     Where  agent  has  expressly  represented  himself  as 

principal  in  a  written  instrument 344 

§149.     Same:  Where  personal  reliance  is  placed  in  agent 344 

§150.    Liability  of  the  third  party  to  the  principal  in  equity 345 

PART  ni. 

THE  RELATION  AS  BETWEEN  AGENT  AND  THIRD 

PARTY. 

CHAPTER  XI. 
Agent's  Liability  to  Third  Party. 

SECTION    1. 

Torts. 

§151.    In  general  agent  is  liable  for  torts 346 

§153.     No  liability  for  non-performance  of  duty  owed  solely  to 

principal    346 

§153.     Liability  for  performance  of  duty  to  principal  injurious 

to  third  party 347 

SECTION    2. 

Contracts  for  Disclosed  Principal. 

§154.     Agent  generally  not  liable 349 

§155.     Written  contracts  not  under  seal 349 

§156.     Sealed    and    negotiable    instruments 350 

§157.     Liability  for  unauthorized  contracts 351 

§158.     Liability  for  contracts  made  on  behalf  of  a  non-existent 

or  incompetent  principal 353 

SECTION    3. 
Contracts  for  Undisclosed  Principal. 

§159.     Agent  is  liable  on  contracts  for  undisclosed  principal 354 

§160.     Agent 's    liability    in    quasi-contract 355 

CHAPTER  XIL 

Third  Party's  Liability  to  Agent. 

§161.     In  tort 357 

§162.     In  contract :    In  general 358 

§163.     Agent   alone   can  sue  on  sealed  or  negotiable  instrument 

made  in  agent 's  name 358 

§164.     Agent  as  well  as  principal  may  sue  when  principal  is  un- 
disclosed     359 

§165.    Agent  as  well  as  principal  may  sue  on  a  written  simple  con- 
tract made  in  agent's  name 360 


CONTENTS 

§166.    Agent  may  sue  in  his  own  behalf  where  he  has  a  special 

property    360 

§167.     Agent  may  sue  in  quasi-contract  in  cases  of  mistake,  etc.  .361 

Appendix  A.     Contracts    363 

Appendix  B.     Quasi-contracts    371 

Appendix  C.    Agency  373 


PRBTATORY  NOTE. 

This  work  has  been  prepared  for  the  purpose  of  giving 
a  brief  but  acjcurate  account  of  the  principal  doctrines  of 
American  law,  in  such  form  that  they  may  be  readily  com- 
prehensible, not  only  to  lawyers,  but  to  intelligent  readers 
without  technical  legal  training. 

Sir  William  Blackstone,  the  first  English  professor  of 
law,  in  his  opening  lecture  at  Oxford  in  1758,  conceived 
that  a  competent  knowledge  of  the  laws  of  the  society 
in  which  he  lived  was  a  proper  accomplishment  for  every 
gentleman  and  scholar,  and  a  highly  useful  part  of  a 
liberal  education.  Mr.  Justice  James  "Wilson,  of  the 
United  States  Supreme  Court,  who  delivered  the  first 
regular  course  of  law  lectures  in  America  at  the  Uni- 
versity of  Pennsylvania  in  1790,  said : 

**The  science  of  law  should,  in  some  measure,  and  in 
some  degree  be  the  study  of  every  free  citizen  and  of 
every  free  man.  Every  free  citizen  and  every  free  man 
has  duties  to  perform  and  rights  to  claim.  Unless  in  some 
measure  and  in  some  degree  he  knows  those  duties  and 
those  rights,  he  can  never  act  a  just  and  independent 
part.  .  .  .  Happily  the  general  and  most  important 
principles  of  law  are  not  removed  to  a  very  great  distance 
from  common  apprehension.  ...  As  a  science,  the 
law  is  far  from  being  so  disagreeable  or  so  perplexing  a 
study  as  it  is  frequently  supposed  to  be.  Some,  indeed, 
involve  themselves  in  a  thick  mist  of  terms  of  art,  and 
use  a  language  unknown  to  all  but  those  of  the  profession. 
By  such,  the  knowledge  of  the  law,  like  the  mysteries  of 

I 


ii  PREFATORY  NOTE 

some  ancient  divinity,  is  confined  to  its  initiated  votaries. 
This  ought  not  to  be  the  case.  The  knowledge  of  these 
rational  principles  on  which  the  law  is  founded  ought, 
especially  in  a  free  government,  to  be  diffused  over  the 
whole  community." 

A  knowledge  of  legal  principles  is  not  less  useful  or 
interesting  today  than  it  was  in  the  eighteenth  century, 
though  it  is  considerably  more  difficult  to  obtain  than  it 
was  just  after  the  publication  of  Blackstone's  Commen- 
taries. Perhaps  more  than  at  any  time  since  the  formative 
days  of  the  Republic,  the  people  are  now  seeking  to  under- 
stand the  principles  of  law  and  government  under  which 
they  live,  and  to  take  an  intelligent  part  in  administering 
or  improving  them.  The  special  difficulties  in  the  way  of 
this  are  due  to  the  enormous  expansion  of  human  activity 
progressively  going  on,  and  to  the  character  of  our  law, 
largely  founded  as  it  is  upon  judicial  precedents.  It  is 
not  possible  really  to  understand  any  considerable  prin- 
ciple of  American  or  English  law,  without  tracing  its 
history  back  through  a  succession  of  cases,  in  which  courts 
have  actually  applied,  explained,  limited,  modified,  or  en- 
larged the  legal  doctrine,  and  thus  wrought  it  into  the  form 
it  now  bears.  The  application  of  principles  thus  evolved 
to  the  complexities  of  modern  life  has  resulted  in  a  mass 
of  law,  too  unwieldy  to  be  adequately  studied  from  its 
sources  and  explained  in  its  entirety  by  any  one  person, 
any  more  than  an  encyclopedia  of  medicine  could  be  well 
written  by  a  single  physician  in  the  present  state  of 
medical  knowledge.  The  accurate  statement  of  the  prin- 
ciples of  law  actually  in  operation  over  the  wide  field  of 


PKEFATORY  NOTE  iii 

twentieth  century  activity  is  thus  necessarily  a  matter 
for  specialists. 

For  the  purpose  of  popular  presentation,  however,  it  is 
not  enough  that  a  writer  be  a  specialist  upon  a  legal 
topic,  but  he  must  be  able  to  seize  its  cardinal  points  and 
present  them  clearly  and  forcibly,  with  the  proper  amoun* 
of  concrete  illustration,  and  without  cumbering  detai]. 
No  men  as  a  class  are  so  likely  to  do  this  well  as  profes- 
sional teachers  in  university  schools  of  law,  who  are  con- 
stantly engaged  in  analyzing  and  classifying  this  immense 
mass  of  legal  material,  and  in  arranging  it  for  presenta- 
tion to  students  in  the  most  orderly  and  forcible  manner. 
By  profession  such  men  are  legal  specialists  with  a  talent 
for  lucid  explanation,  and  their  services  have  been  chiefly 
enlisted  in  the  preparation  of  this  work.  AH  of  the 
articles  are  written  by  men  who  have  devoted  special 
study  to  the  topics  they  have  undertaken,  and  most  of  the 
writers  are  professional  teachers  of  law  in  our  larger 
university  schools. 

The  method  of  treatment  employed,  within  the  limits 
of  space  permissible,  has  been  to  discuss  the  development 
and  application  of  the  more  important  principles  of  oui 
law  by  illustrations  drawn  from  leading  cases  that  have 
arisen  in  actual  litigation.  Under  our  system  of  law- 
making by  judicial  precedent,  these  cases  are  constantly 
cited  and  relied  upon  by  the  courts  as  authority  for  the 
legal  principles  enunciated  in  them,  and  this  method  of 
dealing  with  law  at  first  hand  has  a  freshness  and  in- 
terest quite  foreign  to  the  mere  enumeration  of  dry-as- 
dust  abstractions,  labeled  rules  o2  law.    By  omitting  de- 


ir  PREFATORY  NOTE 

tails,  by  passing  over  unimportant  topics  with  brief  men- 
tion, by  a  careful  system  of  cross-references  to  avoid 
duplication  of  matter  in  articles  upon  related  subjects, 
and  by  an  earnest  effort  to  secure  due  proportion  in  the 
treatment  of  the  various  subjects,  it  has  been  possible  in 
a  modest  compass  to  give  a  really  clear,  accurate,  and 
readable  statement  of  the  legal  principles  actually  ap- 
plied by  the  courts  of  this  country  in  all  of  the  more  im- 
portant branches  of  the  law. 

Sufficient  explanation  has  been  given  of  various  tech- 
nical matters  in  the  introductory  volume,  in  the  glossary, 
and  in  connection  with  each  special  topic,  so  that  all  of 
the  articles  may  be  understood  by  the  intelligent  reader, 
without  professional  guidance,  provided  that  the  elements 
of  fundamental  topics,  like  Contracts,  Agency,  Torts,  and 
Eeal  Property,  be  mastered  before  advanced  subjects, 
founded  on  them,  be  undertaken.  At  the  close  of  each 
volume  have  been  placed  a  number  of  simple  concrete 
problems,  designed  to  enable  the  reader  to  test  his  com- 
prehension of  what  he  has  read.  The  discussion  of  prin- 
ciples in  the  text  appropriate  to  each  problem  is  indicated 
by  the  section  number  prefixed  to  the  problem. 

The  editorship  of  this  work  has  been  divided  between 
James  P.  Hall  and  James  D.  Andrews.  Volumes  I,  II, 
III,  IV,  V,  VI,  VII  (except  the  article  on  Banking),  VIII, 
IX,  X,  XI  and  XII  have  been  prepared  under  the  super- 
vision of  Mr.  Hall.  Volume  XIII,  the  article  on  Bank- 
ing in  Volume  VII,  and  all  of  Volume  XIV,  except  the  in- 
dex and  glossary,  are  the  work  of  Mr.  Andrews. 


INTRODUCTION 


BY 


JAMES  PARKER  HALL, 

A.  B.    (Cornell   University) 
LL,.   B.    (Harvard  University) 

Professor  of  Law  and  Dean  of  Law  School, 
University  of  Chicago. 


CHAPTER  I. 

LAW:     ITS  MEANING,  SOUECES,  AND  CLASSIFICATION. 

Section  1.    What  is  Law? 

§  1.  Varying  uses  of  the  word  "law."  What  is  law? 
We  speak  of  the  laws  of  Go(i,  the  moral  law,  the  laws 
of  nature,  the  laws  of  logic  and  esthetics,  the  laws  of 
political  economy,  and  the  like,  as  well  as  the  laws  of 
Illinois  and  New  York.  Just  what  is  meant  by  '4aw"  in 
each  of  these  phrases? 

V 


vi  INTRODUCTION 

§2.  Laws  of  God.  **Thou  shalt  have  no  other  gods 
before  me 'Ms  a  rule  that  may  be  believed  to  be  imposed 
upon  mankind  by  God  as  a  divine  Ruler.  It  is  a  command 
from  a  source  entitled  to  obedience,  and  imposes  a  com- 
pulsive obligation  upon  all  believers— a  compulsion,  how- 
ever, that  derives  its  ultimate  force  from  fear  of  the  con- 
sequences of  divine  displeasure,  if  it  is  disobeyed,  rather 
than  from  human  sanctions.  In  some  societies,  and  doubt- 
less in  the  early  stages  of  all  societies,  the  violation  of 
commands  believed  to  be  divine  may  regularly  receive 
human  punishment,  and  at  later  periods  obedience  may 
be  practically  coerced  by  the  force  of  public  opinion,  but 
these  are  merely  additional  sanctions  not  necessarily  in- 
volved in  the  notion  of  a  law  of  God. 

§  3.  Moral  laws.  * '  Thou  shalt  not  covet  thy  neighbor 's 
goods"  may  likewise  be  believed  to  be  a  law  of  God,  but 
it  may  also  be  recognized  as  having  a  moral  obligation 
by  persons  indisposed  to  admit  its  divine  authority.  The 
compulsive  force  of  this  moral  obligation  is  public  or 
class  opinion,  or  even  the  dictates  of  the  individual  con- 
science, either  or  all  of  which  may  in  particular  instances 
exercise  a  stronger  influence  over  men's  actions  than 
the  commands  of  the  legislature.  These  moral  obliga- 
tions may  vary  from  those  of  the  most  sacred  and  solemn 
character  to  those  of  the  most  petty  nature,  though  the 
latter  are  more  likely  to  be  spoken  of  as  laws  of  fashion 
or  of  etiquette.  The  sanction  of  them  all  is  to  be  found 
in  public  or  individual  sentiment. 

§  4.  Laws  of  nature.  That  a  solid  body  left  free  above 
the  earth's  surface  will  fall  toward  it  with  a  certain 


INTRODUCTION  vii 

regularly  increasing  velocity  (qualified  by  the  friction  of 
the  air)  is  called  a  * '  law  of  nature. ' '  Many  such  interest- 
ing and  useful  ''laws"  have  been  discovered,  and  more 
are  being  constantly  brought  to  light  as  nature  is  inter- 
rogated by  tireless  experimenters.  From  the  scientific 
point  of  view  there  is  nothing  in  all  this  corresponding  to 
the  notion  of  obligation  on  the  part  of  bodies  to  gravitate 
toward  each  other,  or  of  external  compulsion  of  them  to 
do  so.  The  so-called  ''law"  here  simply  means  that 
certain  facts  regularly  accompany  or  follow  certain  other 
facts.  Whether  this  is  on  account  of  some  never-failing 
external  compulsion,  or  is  due  to  inherent  qualities  of 
matter,  or  to  some  other  reason,  is  a  subject  for  philo- 
sophical speculation  which  is  in  nowise  involved  in  the 
statement  of  the  "law."  Moreover,  if  compulsion  there 
be,  the  objects  compelled,  so  far  as  they  consist  of  non- 
sentient  matter,  are  not  supposed  to  have  any  possible 
choice  about  yielding  to  the  compulsion.  The  observed 
results  of  a  natural  "law"  seem  to  flow  inevitably  and 
mechanically  from  appropriate  antecedent  conditions. 

§  5.  Laws  of  logic  and  esthetics.  Special  instances  of 
natural  law  are  the  so-called  laws  of  logic  or  laws  of 
thought.  AH  sane  persons  at  once  recognize  the  neces- 
sary truth  of  the  proposition,  ' '  Things  identical  with  the 
same  thing  are  identical  with  each  other."  Just  as  the 
nature  of  our  consciousness  compels  us  to  think  of  things 
as  existing  in  space  and  of  events  as  occurring  in  time, 
so  there  is  a  certain  uniformity  in  the  mode  of  reasoning 
of  all  sane  minds  as  regards  at  least  the  simpler  deduc- 
tions from  given  premises.    Here  again  the  only  com- 


viii  INTRODUCTION 

pulsion  that  exists  is  inherent  in  the  nature  of  reasoning 
consciousness,  and  there  is  no  alternative  of  disobedience 
open  to  us.  By  no  effort  of  the  will  or  of  the  intellect 
can  we  convince  ourselves  that  things  equal  to  the  same 
thing  are  not  equal  to  each  other. 

In  a  multitude  of  phrases,  such  as  laws  of  beauty,  laws 
of  art,  laws  of  the  drama,  laws  of  architecture,  and  so 
forth,  the  word  is  used  to  indicate  a  rather  indefinite  body 
of  conventions  of  taste  approved  more  or  less  generally 
by  persons  familiar  with  these  fields  of  effort.  Doubtless 
the  more  important  of  these  conventions  are  frequently 
conceived  to  commend  themselves  so  generally  to  minds 
trained  in  these  special  matters  as  to  correspond  to  some- 
thing innate  in  artistic  consciousness.  In  so  far  as  this 
is  true  they  may  perhaps  be  tentatively  classified  with 
the  natural  laws  of  the  mind. 

§  6.  Economic  laws.  ' '  Men  buy  in  the  cheapest  market 
and  sell  in  the  dearest"  is  a  classical  law  of  political 
economy,  and  one  of  the  fundamental  assumptions  upon 
which  rests  much  of  the  reasoning  in  that  subject.  Doubt- 
less it  is  so  generally  true  that  it  may  readily  come  to  be 
regarded  as  a  natural  law  akin  to  those  of  gravitation 
and  of  thought.  One  important  difference  suggests  itself, 
however.  Men  buy  in  the  cheapest  market  only  because 
they  choose  to  do  so.  They  are  free  to  act  differently 
and  violate  no  obligations  human  or  divine  in  doing  so. 
The  so-called  law  here  describes  merely  a  strong  tendency 
in  human  conduct  and  not  a  relation  that  exists  inde- 
pendently of  human  will.  The  instincts  of  the  lower 
animals  perhaps  occupy  a  position  midway  between  the 


INTRODUCTION  ix 

rigorous  sequence  of  inanimate  nature  and  the  strong 
but  still  controllable  tendencies  observable  in  human  so- 
ciety. The  word  ''law"  thus  has  no  fixed  meaning  even 
when  applied  to  an  orderly  succession  of  phenomena. 

§  7.  Law  as  a  rule  of  human  conduct  enforced  by  the 
state.  When  we  consider  the  statement:  "A  master  is 
liable  for  the  acts  of  his  servants  within  the  scope  of  the 
authority  given  them,"  we  use  the  word  *'law"  applied 
to  it,  in  quite  a  different  sense  from  its  use  in  any  of 
the  foregoing  examples.  Nothing  inherent  in  the  nature 
of  matter,  or  of  consciousness,  or  of  human  society  re- 
quires such  a  rule.  In  fact  it  does  not  exist  (save  in 
special  cases)  throughout  a  large  part  of  the  civilized 
world.  Few  would  maintain  that  it  had  any  divine  sanc- 
tion, and  certainly  in  many  instances  neither  the  social 
nor  individual  conscience  would  deem  it  morally  obliga- 
tory. Yet  the  courts  of  America  and  England  apply  the 
rule  in  actual  litigation.  Its  sanction  is  neither  fear  of 
divine  displeasure  nor  the  dictates  of  public  opinion  or 
of  private  conscience.  Organized  society  enforces  it  sup- 
ported by  the  whole  physical  power  of  the  state,  if  neces- 
sary. A  law,  in  the  true  legal  sense,  is  a  rule  of  human 
conduct  that  will  be  enforced  by  the  state  through  its 
public  tribunals  or  officers.  Its  obligations  bind  human 
beings  only,  and  its  sanction  proceeds  from  politically 
organized  human  societ5\ 

§8.  Suggested  qualifications  of  this.  Some  writers 
have  thought  true  laws  prescribe  general  rules  for  ex- 
ternal human  actions  only.  No  doubt  this  is  very  gen- 
erally true,  but  it  seems  to  be  not  quite  universal  in  fact 


X  INTRODUCTION 

and  not  at  all  so  necessarily.  Conceivably  an  organized 
society  might  attach  legal  liability  to  the  existence  of  evil 
states  of  mind,  such  as  envy  or  hatred,  just  as  heresy  was 
once  punished.  If  unaccompanied  by  appropriate  ex- 
ternal acts,  the  proof  of  such  mental  states  would  or- 
dinarily be  difficult  or  impossible,  but  the  voluntary  ad- 
mission of  their  past  existence  by  the  person  charged 
would  be  at  least  one  permissible  method  of  proof;  and 
it  seems  baldly  fictitious  to  assert  in  answer  that  what  is 
punished  in  this  case  is  the  confession  and  not  the  pre- 
ceding mental  state.  No  such  assertion  would  be  made  re- 
garding the  confession  of  an  ordinary  criminal  act  that 
could  not  be  otherwise  proven.  Apart  from  merely 
speculative  questions,  however,  it  is  certain  that  states 
today  pass  acts  so  affecting  the  rights  of  particular  in- 
dividuals or  groups  of  individuals  as  by  no  means  to  be  a 
general  rule.  Thus,  where  unrestrained  by  constitutional 
prohibitions,  the  legislature  may  enact  that  A  and  B 
shall  no  longer  be  husband  and  wife,  or  that  X,  Y,  and  Z 
may  act  as  a  corporation  with  certain  powers,  while  deny- 
ing to  persons  generally  the  right  to  obtain  either  divorces 
or  corporate  charters.  So  long  as  such  acts  are  enforced 
by  the  courts  they  seem  properly  to  be  called  laws,  and 
this  is  the  universal  usage  of  the  legal  profession. 

Section  2.    Sources  of  Law. 

§  9.  Custom.  It  is  generally  agreed  that  the  earliest 
source  of  law  was  custom.  Long  before  there  was  any- 
thing corresponding  to  a  political  organization  that  en- 
forced rules  of  human  conduct  there  were  family  and 


INTRODUCTION  xi 

group  customs,  originating  in  utility  or  religion  or  acci- 
dent, that  were  normally  followed  under  the  sanction  of 
divine  command,  public  opinion,  or  family  authority. 
When  organized  society  of  a  rudimentary  type  undertook 
the  enforcement  of  law,  the  more  important  of  these  cus- 
toms  doubtless  constituted  practically  the  whole  body  of 
the  law.  Today  custom  constitutes  but  a  very  small  part 
of  the  law  of  any  of  the  more  progressive  nations.  As 
a  source  of  law  it  has  been  almost  wholly  displaced  by 
adjudication  and  by  legislation,  which  are  described  be- 
low. On  the  other  hand,  by  far  the  larger  part  of  the 
law  of  the  relatively  stationary  peoples  of  Asia  is  still 
immemorial  custom,  and  the  rigor  with  which  this  binds 
the  lives  of  men  to  ideals  of  conduct  but  little  suited  to 
the  modern  world  is  the  greatest  obstacle  to  their  sharing 
the  active  progressive  life  of  the  western  world. 

§  10.  Same:  Illustrations.  Even  in  early  times  doubt- 
less all  customs  were  not  enforced  by  organized  society. 
In  periods  of  which  we  have  a  definite  history  we  find 
the  courts  enforcing  some  customs  and  rejecting  others, 
according  as  they  have  appeared  reasonable,  beneficial, 
not  opposed  to  existing  law,  or  the  contrary.  The  early 
law  of  real  property  was  almost  wholly  customary ;  and 
the  present  law  of  negotiable  paper  is  chiefly  founded 
upon  the  custom  of  merchants  engaged  in  international 
trade  as  it  developed  in  Europe  before  the  year  1700. 
About  that  time  the  English  courts  began  to  adopt  these 
customs  and  enforce  them  as  English  law  and  the  process 
went  on  with  great  rapidity  under  Lord  Mansfield  after 
the  middle  of  the  eighteenth  century. 

Vol.  1—3 


xii  INTRODUCTION 

Tliat  custom  as  a  source  of  law  still  plays  a  part, 
thougli  a  small  one,  appears  from  some  recent  instances. 
The  mining  laws  of  California  first  enforced  in  the  courts 
were  the  customs  of  the  early  gold  miners  of  that  state. 
See  the  article  on  Mining  Law,  Chapter  I,  in  Volume  V 
of  this  work.  Even  as  late  as  1875,  in  England,  a  custom 
of  bond  brokers  to  regard  certain  written  promises  to 
'Seliver  bonds  as  having  some  of  the  characteristics  of 
the  bonds  themselves  was  upheld  by  the  courts,  although 
inconsistent  with  the  ordinary  rules  governing  such  in- 
struments (1). 

§  11.  Adjudication  as  a  source  of  law.  The  early  deci- 
sions of  courts  are  based  upon  custom,  or,  that  failing, 
upon  the  justice  of  the  particular  case.  Subsequent 
similar  cases  naturally  tend  to  be  decided  the  same  way, 
and  a  judicial  habit  of  following  precedents  is  likely  to 
become  established  and  finally  to  become  obligatory.  This 
has  been  the  history  of  the  common  law  for  six  or  seven 
hundred  years.  The  common  law  judges  have  professed 
to  decide  cases  according  to  precedents  where  clear  ones 
properly  applicable  could  be  found.  Even  decisions  upon 
customs,  being  ordinarily  more  precise  and  definite  than 
the  custom,  come  to  establish  the  law  for  later  cases  in- 
stead of  an  appeal  being  made  to  the  original  custom. 
Where  no  exact  precedent  exists,  analogous  ones  will  be 
followed;  and  so  precedents  are  extended,  modified,  and 
applied  to  new  situations  until  a  question  rarely  arises 
for  which  there  are  not  at  least  some  strongly  analogous 


(1)     Goodwin  v.  Roberts,  L.  R.  10  Exch.  337. 


INTRODUCTION  xiii 

precedents.  The  court  thus  reflects,  conservatively,  the 
social  ideas  of  its  time,  tempered  by  those  of  the  imme- 
diate past,  and  really  makes  law  by  its  decisions  which 
become  precedents  for  the  future.  This  subject  of  judicial 
law-making  has  so  important  a  place  in  English  and 
American  law  that  Chapter  III  of  this  Introduction  is 
devoted  to  a  thorough  explanation  and  discussion  of  it. 

Law  created  by  custom  or  adjudication  is  often  called 
unwritten  law,  as  distinguished  from  law  created  by  legis- 
lation, which  is  called  statutory  or  written  law. 

§  12.  Legislation  as  a  source  of  law.  Popular  custom 
and  judicial  precedent  necessarily  operate  slowly  and 
irregularly  in  making  and  changing  law.  In  every  or- 
ganized state  there  exists  some  power  deliberately  to 
change  the  law  for  the  future  by  legislative  decree.  The 
method  and  organ  of  legislation  may  vary  from  the  edict 
of  a  czar  to  the  vote  of  a  town  meeting.  In  primitive 
societies  deliberate  legislation  is  the  least  important 
source  of  law;  in  modern  society  it  is  by  far  the  most  im- 
portant one.  Custom  as  a  source  of  law  almost  fails; 
adjudication  is  hampered  by  former  precedents  and  by  its 
inability  to  lay  down  comprehensive  rules  for  the  future ; 
and  extensive  legislation  alone  enables  the  modern  state 
quickly  to  adapt  itself  to  changing  conditions. 

Most  of  the  fundamental  private  relations  between  men 
have  not  been  much  affected  by  legislation.  The  great 
subjects  of  contracts,  torts,  quasi  contracts,  agency, 
domestic  relations,  equity,  and  the  older  crimes  have  in 
the  main  developed  without  legislative  interference.  The 
property  rights  of  married  women,  the  law  of  real  prop- 


xiv  INTRODUCTION 

erty,  corporations,  procedure,  and  the  relation  of  master 
and  servant  are  the  principal  branches  of  private  law 
that  have  been  substantially  changed  by  statute ;  and  in 
all  of  these  the  innovating  legislation  was  compelled  by 
fundamental  changes  in  social  ideals  and  organization. 
In  recent  years  there  has  been  much  legislation  designed 
to  secure  adequate  public  control  of  private  acts  and  busi- 
ness, but  not  much  effecting  substantial  changes  in  the 
law  of  private  rights  between  individuals. 

Section  3.    Classification  or  Law. 

§  13.  Analytical  classifications.  Law  may  be  classified 
from  many  points  of  view.  For  instance,  it  may  be 
divided  into  public  and  private  law,  accordingly  as  rights 
of  the  state  are  involved,  or  purely  those  of  private  per- 
sons. An  incomplete  division  of  a  similar  nature  is  in- 
dicated by  the  contrasting  terms  civil  and  criminal  law, 
the  former  dealing  with  rights  between  private  indi- 
viduals, and  the  latter  with  the  violation  of  public  rights 
punishable  as  crimes  by  the  state. 

It  may  be  divided  into  substantive  law  and  adjective 
law  (or  procedure),  accordingly  as  it  concerns  rights  to 
be  enforced,  or  methods  of  enforcing  them.  It  may  be 
divided  into  the  law  of  rights  in  rem  and  of  rights  in 
personam,  accordingly  as  rights  exist  against  everyone, 
or  only  against  certain  definite  persons;  for  instance,  a 
right  not  to  be  assaulted  exists  against  everyone,  but 
a  right  to  enforce  a  contract  exists  only  against  persons 
bound  by  the  contract.  It  may  be  divided  into  normal 
and  abnormal  law,  accordingly  as  the  persons  concerned 


INTRODUCTION  XV 

are  free  from  or  labor  under  certain  personal  disabilities, 
such  as  infancy,  lunacy,  alienage,  coverture,  criminality, 
and  the  like.  Rights  may  be  divided  into  consensual  and 
non-consensual,  accordingly  as  they  arise  from  agree- 
ment or  assent,  or  are  given  by  law  irrespective  of  assent ; 
for  instance,  the  right  to  enforce  a  contract  arises  only 
from  an  agreement  to  enter  into  the  contract,  while  the 
right  not  to  be  robbed  is  given  by  law  irrespective  of  the 
consent  of  prospective  robbers  (2). 

§  14.  Practical  classifications.  The  divisions  indicated, 
though  fundamental  and  important  to  a  philosophical  un- 
derstanding of  law  as  a  science  of  human  rights,  are  far 
too  large  and  abstract  to  be  conveniently  used  as  a  classi- 
fication for  practical  professional  purposes,  either  of 
study  or  of  practice.  The  field  of  law  is  ordinarily  divided 
by  teachers  and  writers  into  forty  or  fifty  subjects,  each 
consisting  of  a  group  of  closely  related  topics  treated 
separately  from  other  groups  more  from  practical  than 
from  theoretical  considerations,  though  there  is  usually 
some  fundamental  coherence  between  the  topics  in  each 
group.  Thus,  the  general  subject  of  Contracts  will  be 
treated  as  one  subject,  and  certain  specialized  kinds  of 
contracts  such  as  Sales,  Negotiable  Instruments,  In- 
surance, Suretyship,  Leases,  Mortgages,  and  the  like  will 
be  treated  as  other  separate  subjects.  For  very  full 
treatment  some  of  these  subjects  may  be  divided  again; 


(2)  See  Holland,  Jurisprudence  (10th  ed.).  Chap.  IX.  Various  sys- 
tems of  analytical  classification  of  law  are  discussed  in  the  article  on 
Jurisprudence  and  Legal  Institutions  in  Volume  XIII  of  this  work. 


xvi  INTRODUCTION 

for  instance,  Insurance  might  be  divided  into  the  topics 
of  Fire,  Life,  and  Marine  Insurance. 

In  this  work,  each  of  the  principal  subjects  generally 
recognized  by  modern  teachers  and  writers  is  treated  in 
a  separate  article,  subject  to  two  qualifications.  Sub- 
jects dealing  with  the  organization  and  administration 
of  government  (national,  state,  and  municipal),  and  sub- 
jects that  are  minutely  regulated  by  statute  have  been 
generally  omitted,  both  for  want  of  space  and  because 
these  subjects  deal  with  ordinary  private  rights  between 
individuals  to  but  a  small  extent. 

§  15.  The  common  law.  The  term  ' '  common  law ' '  is 
used  in  legal  writings  with  a  variety  of  meanings,  usually 
apparent  from  the  context.  1.  In  its  widest  sense  the 
term  is  used  to  contrast  the  entire  system  of  English  or 
Anglo-American  law  with  other  great  systems,  usually 
the  Roman  or  civil  law.  In  this  sense  it  includes  not 
merely  all  unwritten  law,  but  such  statutes  as  have  been 
generally  enacted  in  jurisdictions  where  it  prevails  and 
are  so  interwoven  with  the  general  principles  of  the  un- 
written law  as  to  form  a  unified  whole.  2.  In  a  narrower 
sense  it  is  used  to  distinguish  the  rules  of  unwritten  law 
applied  in  England  by  courts  of  law  (or  of  common  law), 
from  those  applied  there  by  courts  of  equity,  courts  of 
admiralty,  the  ecclesiastical  courts,  and  so  forth.  In  this 
sense  it  also  ordinarily  includes  the  older  statutes  that 
have  become  deeply  imbedded  in  the  system,  particularly 
those  affecting  property  rights.  Where,  as  commonly  in 
America,  and  now  in  England,  the  same  courts  apply  the 
rules  both  of  law  and  of  equity,  this  usage  of  the  term 


INTRODUCTION  xvii 

refers  to  those  rules  that  would  be  applied  by  courts  of 
law,  if  the  former  division  still  existed.  3.  In  its  nar- 
rowest sense  it  excludes  from  its  meaning  even  those 
ancient  statutes  referred  to  under  meaning  2,  above. 

In  all  three  of  the  above  senses,  the  common  law  is  m 
force  in  all  American  states,  except  Louisiana,  which  has 
been  under  the  civil  law  since  the  days  of  its  French  and 
Spanish  settlement.  The  common  law  of  any  one  of  our 
states  is  somewhat  different  from  the  common  law  of 
England,  due  to  the  operation  of  two  causes:  (a)  Part 
of  the  English  common  law  not  suited  to  the  conditions  of 
this  country  was  not  applied  by  our  courts,  (b)  Local 
customs  and  adjudications  here,  after  the  settlement  of 
this  country,  have  departed  somewhat  from  those  of  Eng- 
land since  then.  For  the  same  reason  the  common  law 
rules  of  no  two  of  our  states  are  exactly  alike;  and,  in 
addition,  the  states  are  not  agreed  upon  the  date  at  which 
the  English  common  law  and  exi;  ng  statutes  applicable 
to  the  colonies  are  to  be  accepted  as  a  starting  point  for 
American  variations  from  them.  The  dates  most  com- 
monly fixed  for  this  purpose  are  May  13,  1607  (first  per- 
manent settlement  of  Virginia),  and  July  4, 1776  (Declara- 
tion of  Independence). 


CHAPTER  IT. 

OUTLINE  OF  ENGLISH  LEGAL  HISTORx. 

§16.  Roman  and  English  law.  Scope  of  chapteif.  -SVo 
great  systems  of  law  divide  the  western  civilized  world 
between  them,  the  Eoman  and  the  English.  The  Eoman 
is  much  the  older,  and  was  a  highly  developed  system  of 
law,  well  adapted  for  the  needs  of  an  advanced  and 
progressive  civilization,  at  a  time  when  some  of  the  rules 
of  English  law  were  first  being  cast  in  written  form.  The 
Eoman  mind  had  a  distinct  genius  for  law,  and  the  ex- 
tension of  that  law  over  a  vast  empire  gave  it  a  cosmo- 
politan character.  When  the  Eoman  Empire  fell  to  pieces 
in  the  middle  ages,  under  the  assaults  of  its  Teutonic 
conquerors,  the  latter  gradually  adopted  the  Eoman  law 
as  the  basis  of  their  public  and  private  jurisprudence. 
The  great  influence  of  the  French  Napoleonic  code,  almost 
wholly  Eoman,  completed  the  work,  so  that  today  it  can 
be  said  in  general  that  the  law  of  all  continental  Europe 
is  Eoman  in  origin,  except  for  the  retention  in  various 
localities  of  customary  law,  chiefly  concerning  land  hold- 
ing and  the  family  relations. 

The  law  of  England,  for  historical  and  geographical 
reasons,  has  had  quite  a  different  history ;  and  some  un- 
derstanding of  this  is  so  important  as  a  setting  for  the 
principal  legal  doctrines  of  English  and  American  law, 

xviii 


INTRODUCTION  xix 

that  a  short  chapter  will  be  devoted  to  a  sketch  of  the 
development  of  English  law. 

Section  1.    Eaely  Influences  Affecting  English  Law. 

§  17.  Britains  and  Romans.  One  half  century  before 
Christ,  the  Eomans,  under  Julius  Caesar,  first  landed  in 
Great  Britain,  and  found  the  island  inhabited  by  a  rude, 
warlike  people.  More  than  a  century  later  the  Eomans 
had  conquered  the  island  as  far  north  as  the  present 
Scottish  border,  and,  during  more  than  three  centuries, 
Roman  government  and  civilization  existed  in  England. 
Only  the  upper  classes  were  Romanized,  however,  and 
when  the  Roman  troops  were  called  home  in  the  fifth 
century  to  defend  Rome  from  the  Goths,  internal  struggles 
began  in  Britain,  aggravated  by  attacks  from  enemies  in 
Scotland  and  Ireland.  A  party  in  Britain  invited  to 
their  assistance  a  Teutonic  band  from  Jutland  (now 
part  of  the  Danish  peninsula)  and  the  Jutes  landed  in 
England  in  449.  These  allies  proved  uncontrollable,  and 
during  the  century  and  a  half  following,  they,  with  suc- 
cessive bands  of  their  neighbors,  the  Angles  and  the 
Saxons  (whence  the  name  Anglo-Saxon),  conquered  the 
greater  part  of  what  is  now  England.  The  contest  be- 
tween the  British  and  the  invaders  was  so  bitter  that  the 
former  were  practically  exterminated,  and  with  them 
perished  the  ancient  British  laws  and  customs  as  well  as 
the  veneer  of  Roman  civilization.  For  this  reason  Eng- 
lish law  from  the  Anglo-Saxon  conquest  developed  quite 
free  from  the  Roman  influence  that  so  thoroughly  dis- 
placed the  Teutonic  laws  of  the  conquering  Northmen  on 


XX 


INTRODUCTION 


the  Continent.    Whatever  influence  Roman  law  has  had 
upon  the  English  system  came  at  a  much  later  time. 

§  18.  Anglo-Saxons  and  Danes.  For  two  centuries  and 
a  half  after  the  conquest  of  Britain  the  Teutonic  invaders 
were  divided  into  a  number  of  rival  warring  kingdoms. 
At  first  seven  such  petty  nations  emerged,  later  di- 
minished to  three,  and  finally  united  into  the  single  king- 
dom of  Wessex  in  828.  About  this  time  the  Danes  began 
to  harry  the  kingdom,  coming  in  pirate  ships  from  the 
Scandinavian  peninsulas,  and,  after  a  struggle  of  vary- 
ing fortunes,  the  brightest  figure  in  which  was  Alfred  the 
Great,  the  Danes  became  the  rulers  of  England  in  1013. 

The  Anglo-Saxons  and  their  kinsmen  were  a  fierce,  in- 
dependent, liberty-loving  people,  not  readily  subjecting 
themselves  to  any  centralized  government ;  and  this  racial 
tendency  towards  separation  was  increased  by  the  strife 
between  their  kingdoms  in  Britain.  The  whole  Anglo- 
Saxon  and  Danish  period  is  marked  by  the  growth  of  an 
immense  variety  of  local  customs  in  England,  having 
some  similarity,  but  preventing  the  formation  of  a  true 
national  law.  A  considerable  number  of  collections  of 
laws  of  the  various  kingdoms  at  different  times  have  come 
down  to  us.  The  earliest  of  these,  the  laws  of  Ethelbert, 
king  of  Kent,  were  put  in  writing  about  the  year  600; 
and  most  of  the  more  important  rulers  between  then  and 
the  Norman  conquest  also  published  sets  of  laws  in  their 
names,  such  as  the  laws  of  Inne,  Offa,  Alfred,  Edward 
the  Elder,  and  Canute,  the  Danish  king. 

These  written  laws  do  not  deal  much  with  matters  of 
private  right,  except  as  regards  the  preservation  of  the 


INTRODUCTION  xxi 

peace.  Private  feuds  were  frequent,  and  legislation 
strove  to  compel  the  acceptance  of  money  damages  in 
place  of  private  vengeance.  Private  law  doubtless  de- 
pended largely  upon  local  custom. 

§  19.  The  Normans.  The  Norman  conquest,  immedi- 
ately after  1066,  introduced  into  England  a  centralized 
administration  of  fiscal,  military,  and  judicial  matters 
quite  foreign  to  Anglo-Saxon  rule.  The  feudal  system,  if 
not  introduced  by  the  Normans,  was  greatly  strengthened 
and  elaborated  by  them;  and  the  confiscation  of  estates 
made  by  King  William  enabled  him  to  make  grants  of 
lands  to  his  followers  upon  terms  binding  them  into  a 
compact  feudal  organization.  The  nature  and  incidents 
of  the  feudal  system  as  regards  land-holding  are  described 
in  the  article  upon  the  History  of  Real  Property  Law  in 
Volume  V  of  this  work.  Commissioners  inquired  the 
value  of  each  estate,  and  the  sums  due  from  it  to  the 
crown  as  royal  revenue ;  these  particulars  being  recorded 
in  the  famous  Domesday  Book.  Even  the  church  and  its 
holdings  were  made  dependent  upon  the  royal  power.  So 
far  as  was  consistent  with  the  primacy  and  security  of 
the  crown,  however,  English  laws  and  customs  were  re- 
spected and  confirmed,  though  the  local  courts  were  sub- 
jected to  the  jurisdiction  of  the  king's  court  which  heard 
appeals  from  them.  This  naturally  tended  toward  the 
unification  of  the  law. 


Xxu  INTRODUCTION 

Section  2.     Development  of  English  Law  from 
Henry  II  to  American  Independence. 

§  20.  Early  modes  of  trial.  The  Anglo-Saxons  and  the 
Normans  had  the  various  modes  of  trial  that  have  de- 
veloped the  world  over  when  a  certain  middle  stage  of 
culture  has  been  reached.  That  is,  they  had  trial  by  oath, 
by  ordeal,  and  by  battle.  Trial  by  oath  (wager  of  law) 
was  not  a  trial  by  the  oath  of  witnesses  who  could  swear 
to  a  fact  from  personal  knowledge,  but  consisted  in  se- 
curing a  certain  number  of  persons  who  would  swear  with 
certain  solemnities  that  they  believed  a  party  guilty  or 
innocent.  Sometimes  a  defendant  might  free  himself  by 
his  own  oath  given  in  a  certain  form.  Trial  by  ordeal 
!was  common  until  about  1215,  when  it  appears  to  have 
been  forbidden  by  the  church.  The  mode  of  procedure 
for  this  is  described  in  the  article  on  Criminal  Procedure, 
§  59,  in  Volume  III  of  this  work.  Trial  by  battle  (wager 
of  battle)  was  introduced  into  England  by  the  Normans, 
but  was  a  hated  innovation  and  probably  but  little  used. 
It  became  obsolete  centuries  before  it  was  formally 
abolished  in  1819  in  England. 

§  21.  Trial  by  jury.  The  institution  that  perhaps  more 
than  any  other  distinguishes  English  law  from  other 
systems  is  trial  by  jury.  The  rational  determination  of 
questions  of  fact  is  a  difficult  problem  for  the  most  highly 
developed  societies ;  for  primitive  peoples  it  is  well  nigh 
impossible.  The  germ  of  jury  trial  as  a  mode  of  de- 
termining facts  came  through  the  Norman  conquest. 
The  dukes  of  Normandy,  in  matters  of  fiscal  administra- 


INTRODUCTION  xxiii 

tion,  had  employed  in  France  a  system  called  the  in- 
quisition. Questions  relating  to  the  royal  revenue  were 
answered  under  oath  by  persons  who  knew  the  facts  at 
issue;  and  the  sovereign  when  acting  as  judge  between 
his  subjects  sometimes  required  the  same  procedure.  The 
Normans  at  once  introduced  the  inquisition  into  England 
in  fiscal  matters,  and  permitted  its  occasional  use  in  civil 
cases.  In  the  last  half  of  the  twelfth  century  Henry  II 
greatly  extended  the  latter  use  of  the  inquisition.  The 
new  forms  of  action  authorized  by  his  various  legal  re- 
forms all  required  a  jury,  and  the  sudden  abolition  of  the 
ordeal  assisted  in  the  rapid  triumph  of  the  new  method 
of  trial.  Before  the  year  1300  the  jury  was  in  common 
use  in  England  in  all  kinds  of  actions— other  modes  of 
trial  were  the  exception. 

The  original  jury  was  a  far  different  institution  from 
the  one  we  know  today.  Originally  it  consisted  of  an  un- 
certain number  of  men,  chosen  because  they  already  pos- 
sessed information  about  the  fact  at  issue,  and  who  de- 
clared the  fact  chiefly  from  their  own  knowledge.  Where 
experts  were  needed  they  were  simply  added  to  the  jury. 
It  was  a  matter  of  centuries  of  development  before  the 
jury  came  to  be  composed  of  precisely  twelve  men,  who 
acted  only  upon  sworn  evidence  presented  to  them  at  the 
trial,  and  whose  verdict,  required  to  be  unanimous,  was 
kept  within  the  bounds  of  reason  by  a  judge's  power  to 
grant  new  trials.  An  account  of  the  effect  of  this  de- 
velopment of  the  jury  upon  the  law  of  evidence  will  be 
found  in  the  article  on  Evidence  in  Volume  XI  of  this 
work.    A  detailed  account  of  the  procedure  of  a  jury  trial 


xxiv  INTRODUCTION 

in  a  criminal  case  is  given  in  article  on  Criminal  Pro- 
cedure, Chapter  V,  in  Volmne  III  of  this  work  (1). 

§22.  Legal  reforms  of  Henry  II.  Henry  II  was  the 
first  great  English  legislator.  The  earlier  collections  of 
Anglo-Saxon  laws,  though  doubtless  new  in  part,  did  not 
profess  to  be  new  legislation  so  much  as  a  re-affirmation 
of  laws  already  approved  by  custom  or  other  legal  sanc- 
tion. Coming  to  the  throne  in  1154,  Henry  reigned  for 
thirty-five  years.  He  endeavored  with  a  fair  measure  of 
success  to  draw  the  line  between  the  jurisdiction  of  the 
temporal  and  the  ecclesiastical  courts,  so  as  to  retain  in 
the  royal  hands  the  power  necessary  for  a  strong  national 
government.  In  the  ecclesiastical  courts  the  canon  law 
was  just  becoming  a  well-developed  system,  which  was 
to  have  a  considerable  influence  upon  the  English  law  of 
marriage,  of  wills,  and  of  the  administration  of  estates 
of  deceased  persons.  Better  remedies  were  provided  for 
landholders  in  the  king's  courts,  so  that  actions  concern- 
ing the  possession  of  land  were  now  usually  brought  there 
instead  of  in  the  local  courts;  which  of  course  tended  to 
produce  a  really  uniform  national  law  upon  the  subject 
of  land  tenure,  by  far  the  most  important  class  of  litiga- 
tion at  this  time.  The  extension  to  private  litigation  of 
the  inquisition  (§  21,  above),  now  called  the  recognition, 
which  was  the  early  trial  by  jury,  was  due  to  legislation 
of  Henry ;  and  he  also  introduced  the  practice  of  having 
the  judges  of  his  courts  go  upon  regular  judicial  circuits 
throughout  the  country,  so  that  the  common  law  was  en- 


(1)     An  excellent  account  of  the  history  of  trial  by  jury  in  England 
is  in  Thayer's  Preliminary  Treatise  on  Evidence,  47-182. 


INTRODUCTION  xxv 

forced  uniformly  all  over  England  by  a  single  body  of 
well-trained  lawyers.  Probably  in  Henry's  time  judicial 
records  began  to  be  officially  kept  in  an  orderly  way,  for 
shortly  after  his  death  we  begin  to  have  a  series  of  records 
of  cases  that  have  been  preserved  to  the  present  time. 

One  noteworthy  achievement  of  Henry's  reign  was  the 
extension  of  the  criminal  law  so  that  deeds  of  violence 
were  regularly  punished  in  the  royal  courts  at  the  suit 
of  the  crown,  in  place  of  by  mere  private  vengeance,  or 
even  by  an  accusation  brought  at  the  suit  of  the  person 
wronged.  Better  than  anything  else,  perhaps,  this  shows 
the  increasing  vigor  and  reach  of  the  royal  government. 

§  23.  Magna  Charta.  The  great  importance  of  Magna 
Charta  is  rather  to  English  constitutional  law  than  to 
the  law  of  private  rights.  The  outrageous  government 
of  King  John  in  the  early  years  of  the  thirteenth  century 
arrayed  against  him  substantially  the  entire  English 
people,  nobles,  churchmen,  and  commons ;  and  at  Runny- 
mede,  in  1215,  they  compelled  him  to  assent  to  a  grant  of 
privileges  from  the  crown  to  the  English  people.  The 
most  important  of  these  concerned  the  administration  of 
justice  and  the  levying  of  taxes,  though  various  clauses 
dealt  with  municipal,  feudal,  and  commercial  privileges. 
The  two  articles  of  the  great  charter  most  frequently 
quoted  are  the  39th  and  the  40th: 

39.  *'No  freeman  shall  be  arrested  or  detained  in 
prison  or  deprived  of  his  freehold,  or  outlawed,  or 
banished,  or  in  any  way  molested;  and  we  will  not  set 
forth  against  him,  nor  send  against  him,  unless  by  the 
lawful  judgment  of  his  peers  and  by  the  law  of  the  land. 


xxvi  INTRODUCTION 

40.  '*To  no  one  will  we  sell,  to  no  one  will  we  refuse 
or  delay  right  or  justice. ' ' 

To  these  articles  may  be  traced  some  of  the  most  im- 
portant guaranties  of  individual  liberty  and  property 
contained  in  our  American  constitutions  (see  the  article 
on  Constitutional  Law  in  Volume  XII  of  this  work). 

Magna  Charta  has  been  confirmed  by  other  English 
sovereigns  many  times  since  the  day  of  John.  The  prin- 
ciple that  the  crown  was  bound  by  the  fundamentals  of 
constitutional  law,  without  an  expressed  assent,  was  es- 
tablished slowly;  and  John's  successors  broke  the  charter, 
and  then  reconfirmed  it  as  the  price  of  a  grant  of  money 
from  the  nation  through  a  long  course  of  years.  The 
principles  of  Magna  Charta  are  now  the  bed  rock  of  the 
English  constitution. 

§  24.  Legislation  of  Edward  I.  Edward  I  was  another 
great  legislator;  indeed,  he  has  been  called  the  ''English 
Justinian."  He  completed  the  judicial  reforms  begun  by 
Henry  II.  The  king's  court,  which  had  been  in  process 
of  division  for  some  time,  was  now  definitely  separated 
into  three  courts  of  law,  the  king's  bench,  the  common 
pleas,  and  the  exchequer.  The  king's  bench  had  juris- 
diction over  criminal  cases,  it  controlled  various  royal 
ofiBcers,  and  it  had  a  civil  jurisdiction  over  all  actions 
where  there  was  a  breach  of  the  peace.  The  common  pleas 
was  the  court  of  general  jurisdiction  for  actions  between 
private  persons ;  and  the  exchequer  originally  dealt  with 
cases  concerning  the  revenue  of  the  crown.  The  juris- 
diction of  these  three  courts  overlapped  at  places,  and 
by  a  series  of  legal  fictions  they  finally  came  to  be  con- 


INTRODUCTION  xxvii 

current  over  many  matters,  especially  in  private  litiga- 
tion, though  they  were  not  consolidated  until  1875.  The 
separate  judicial  powers  of  the  chancellor  began  to  be 
recognized,  as  well  as  the  jurisdiction  of  the  king  in 
council,  which  gives  us  the  germ  of  the  court  of  equity, 
the  star  chamber,  and  the  privy  council  later. 

In  Edward's  reign  the  statute  of  mortmain  was  enacted 
which  forbade  the  transfer  of  land  to  religious  bodies 
so  that  it  should  cease  to  render  its  proper  feudal  service 
to  the  king;  the  statute  of  Winchester,  which  provided 
on  an  elaborate  scale  for  the  enforcement  of  public  order; 
the  statute  of  merchants,  which  provided  for  the  better 
collection  of  trading  debts;  the  statutes  de  donis  and  quia 
emptores,  which  deeply  altered  feudal  land-holding  and 
became  the  basis  of  English  real  property  law  for  cen- 
turies; the  statute  of  Westminster  II,  which  provided  for 
new  forms  of  remedy  in  the  royal  courts  for  causes  of 
action  not  included  under  the  old  writs;  and  Parliament 
in  something  like  its  present  form  became  established  as 
the  regular  legislative  body  of  the  kingdom. 

''The  main  characteristic  of  Edward's  statutes  is  that 
they  interfere  at  countless  points  with  the  ordinary 
course  of  law  between  subject  and  subject.  They  do  mora 
than  this-many  clauses  of  the  greatest  importance  deal 
with  what  we  should  call  public  law— but  the  characteris- 
tic which  makes  them  unique  is  that  they  enter  the  do- 
main of  private  law  and  make  vast  changes  in  it.  For 
ages  after  Edward's  day,  king  and  Parliament  left  pri- 
vate law  and  civil  procedure,  criminal  law  and  criminal 
procedure,  pretty  much  to  themselves.    ...    We  may 


Vol.  1—4 


xxviii  INTRODrCTION 

turn  page  after  page  of  the  statute  book  of  any  century 
from  the  fourteenth  to  tlie  eighteenth,  both  inohisive, 
without  finding  any  cliange  of  note  made  in  the  hiw  of 
property,  or  the  law  of  contract,  or  the  Law  about  tliefts 
and  murders,  or  the  law  as  to  how  property  may  be  re- 
covered or  contracts  may  be  enforced,  or  the  law  as  to 
how  persons  accused  of  theft  or  murder  may  be  pun- 
ished" (2). 

§  25.  Legislation  of  Henry  VIII.  Tlie  jicriod  of  Henry 
Vlli  was  also  one  of  great  legislative  activity.  For  the 
first  time  the  church  was  legally  wholly  subjected  to  the 
state,  the  Church  of  England  was  severed  from  the 
Church  of  Kome,  and  the  English  king  was  made  supreme 
head  of  the  national  church.  The  statute  of  uses  (1535) 
revolutionized  methods  of  transferring  title  to  land  and 
made  possible  the  creation  of  future  estates  that  has 
since  become  one  of  the  principal  characteristics  of  Eng- 
lish and  American  real  property  law.  See  History  of 
Eeal  Property,  §§  34-41,  and  Title  to  Real  Estate,  §§  35-41, 
both  in  Volume  V  of  this  work.  The  statute  of  wills 
(1540)  enabled  the  owners  of  land  to  devise  all  that  was 
held  in  socage  tenure  and  two-thirds  of  what  was  held 
by  the  common  military  tenure  (see  History  of  Real 
Property,  §§  4-11,  in  Volume  V  ).  During  this  reign  also 
there  was  made  the  last  serious  attempt  to  supplant  the 
common  law  by  the  Roman  or  civil  law,  that  was  then  se- 
curing general  acceptance  on  the  continent  of  Europe. 


(2)    Maitland,  Const.  Hist  of  Eng..  19. 


INTRODUCTION  xxix 

Although  the  attempt  had  some  encouragement  from  the 
king,  himself,  it  signally  failed  (3). 

§  26.  The  Stuart  period.  Under  the  Stuarts  the  im- 
portant constitutional  controversies  between  the  crown 
and  the  people  over  taxation,  monopolies,  and  the  arbi- 
trary administration  and  suspension  of  laws  were  finally 
settled.  The  power  of  the  crown  to  grant  monopolies  was 
forbidden  by  an  act  of  Parliament  in  the  reign  of  James 
I,  who  had  openly  professed  to  act  upon  the  theory  of 
"the  divine  right  of  kings;"  and  his  son  Charles  I  was 
compelled  in  1628  to  assent  to  the  Petition  of  Right, 
which  forbade  taxation  except  by  consent  of  Parliament. 
After  the  dissolution  of  this  Parliament,  however, 
Charles  attemi)ted  to  collect  ship-money,  really  a  tax. 
The  long  Parliament,  which  assembled  in  1640,  declared 
this  practice  illegal  and  abolished  the  star  chamber  and 
two  or  three  other  similar  courts  through  which  the  king 
had  arbitrarily  enforced  his  will.  Charles  I  was  executed 
in  the  civil  war  that  followed,  and  when  Charles  II  came 
to  the  throne  at  the  Restoration  in  1660  he  forebore  fur- 
ther open  resistance  to  the  principles  thus  established. 
In  1679  the  personal  liberty  of  the  individual  was  further 
protected  by  the  habeas  corpus  act  which  prevented  ar- 
bitrary imprisonment  by  the  crown.  Under  James  II  the 
contest  over  the  king's  prerogative  began  again  when  he 
attempted  to  suspend  the  operation  of  penal  laws.  The 
Revolution  of  1688  followed,  and  the  great  statute  called 
the  Bill  of  Rights,  enacted  at  the  accession  of  William 


(3)     Maitland.  English  Law  and  the  Renaissance,  3  Essays  in  Ang.-Am. 
Legal  Hist.  1G8,  ff. 


XXX  INTRODUCTION 

and  Mary,  finally  settled  the  long  contest  against  the 
power  of  the  crown.  By  this  act  and  the  Act  of  Settle- 
ment, a  few  years  later,  all  power  was  taken  from  the 
crown  to  tax,  to  interfere  with  existing  laws,  or  to  con- 
trol the  administration  of  justice  by  removing  judges. 

The  principal  changes  in  private  law  made  during  the 
Stuart  period  were  by  the  general  statute  of  limitations 
of  1624,  limiting  the  period  within  which  all  kinds  of  ac- 
tions might  be  brought;  the  abolition  of  the  military  ten- 
ures and  their  burdensome  incidents  in  1660  (see  History 
of  Real  Property,  §  10,  in  Volume  V  of  this  work) ;  and 
the  statute  of  frauds  (1677),  which  required  conveyances 
and  contracts  concerning  land,  and  many  concerning 
chattels,  to  be  in  writing  in  order  to  be  enforceable  in  the 
courts.  The  first  and  the  third  of  these  statutes  have 
been  the  model  for  American  legislation  of  the  same 
character. 

§  27.  The  eighteenth  century.  Between  the  Act  of  Set- 
tlement in  1701  in  England  and  the  Declaration  of  In- 
dependence in  1776  in  America,  there  was  little  develop- 
ment of  English  law  of  much  historical  significance.  The 
unwise  conduct  of  Parliament  in  attempting  to  tax  the 
American  colonists  gave  rise  to  armed  political  resist- 
ance, culminating  in  American  independence;  and  the 
incidents  of  this  struggle  had  considerable  influence  upon 
the  doctrines  of  American  constitutional  law.  See  the 
article  on  Constitutional  Law  in  Volume  XII* 

§  28.  Growth  of  judge-made  law.  From  the  time  of 
Edward  I  until  well  into  the  nineteenth  century,  a  per- 
iod of  five  hundred  years,  the  English  law  of  private 


INTRODUCTION  xxxi 

rights,  other  than  those  concerning  the  transfer  of  real 
property,  was  very  little  affected  by  legislation.  It  was 
altered  slowly  from  generation  to  generation  as  legal  prec- 
edents were  clipped  or  expanded  to  meet  the  more  press- 
ing social  needs  and  changes.  In  many  important  par- 
ticulars it  changed  little  or  none  during  this  long  period. 
The  harshness  of  the  criminal  law  and  the  technicalities 
of  procedure  in  civil  suits  increasingly  lessened  the  ef- 
ficiency of  the  common  law.  But  for  the  system  of 
equity,  which  had  a  large  development  in  the  latter  part 
of  this  period,  some  of  the  legal  reforms  of  the  nineteenth 
century  must  have  come  much  earlier.  The  enormous 
expansion  of  business  which  followed  the  application  of 
steam  power  to  industry  and  transportation  compelled 
reforms  in  procedure  which  have  only  recently  been  com- 
pleted in  England,  and  which,  in  this  country,  still  pro- 
ceed all  too  slowly.  The  increasing  ease  and  rapidity 
with  which  legislative  changes  can  be  made  have  consid- 
erably checked  the  development  of  judge-made  law  in 
recent  years.    See  Chapter  III,  below. 

Section  3.    Courts  of  Equity. 

§29.  Original  theory  of  king's  courts.  The  early 
theory  of  the  royal  courts  in  England,  closely  connected 
with  feudal  doctrines,  was  that  it  was  part  of  the  king's 
prerogative  to  administer  justice  between  his  subjects. 
At  first  the  jurisdiction  was  confined  to  matters  connected 
with  the  interests  of  the  crown,  other  matters  being  de- 
cided in  the  local  courts.  Later  appeals  were  allowed 
from  the  local  courts  to  the  royal  courts,  and  finally  all 


xxxii  INTRODUCTION 

important  original  jurisdiction  was  also  acquired  by  the 
latter.  Before  the  fourteenth  century  the  king  himself 
sometimes  administered  justice  in  his  court,  and  until  a 
very  late  period  the  ordinary  national  courts  were  con- 
sidered the  king's  deputies  for  this  purpose.  After  the 
ordinary  law  courts  had  become  well  separated  in  func- 
tion from  the  individual  action  of  the  king,  the  king  in 
council,  exercising  a  kind  of  reserved  power  in  the  ad- 
ministration of  justice,  interfered  more  or  less  with  the 
law  courts  and  attempted  to  control  their  actions.  Peti- 
tions were  directed  to  the  king  by  persons  who  wished 
such  interference  in  their  cases,  and,  as  the  chancellor 
became  the  king's  chief  legal  adviser,  the  petitions  finally 
were  directed  to  him.  Parliament  remonstrated  at  times 
against  such  interference  with  the  ordinary  course  of 
law,  and,  in  the  fifteenth  century,  the  practice  was  gen- 
erally abandoned  as  to  civil  cases  for  which  there  was  an 
adequate  remedy  in  the  common  law  courts. 

§  30.  Early  development  of  court  of  chancery.  About 
this  time  a  large  and  highly  important  class  of  cases  de- 
veloped, which  the  inelasticity  of  the  common  law  pre- 
vented its  courts  from  dealing  with  properly.  The  com- 
mon law  recognized  as  the  owner  of  property  only  such 
persons  as  had  a  legal  title  to  it,  that  is,  a  title  acquired 
according  to  the  forms  and  conceptions  already  estab- 
lished by  the  common  law.  If  A  conveyed  the  title  to  his 
land  to  B,  upon  B's  promise  to  allow  A  the  beneficial  use 
of  the  land,  the  common  law  recognized  B  as  the  abso- 
lute owner,  and  B's  promise  to  A  was  but  a  moral  obliga- 
tion not  enforceable  in  court.    This  method  of  dealing 


INTRODUCTION  xxxiii 

with  land,  putting  it  in  trust,  as  it  is  called,  proved  a 
highly  convenient  device  for  evading  various  heavy- 
feudal  burdens  of  landowners,  and  particularly  the  for- 
feiture of  land  for  treason  or  other  crimes.  During  the 
Wars  of  the  Roses,  most  prominent  landowners  in  Eng- 
land committed  treason  against  one  king  or  another  in 
the  varying  fortunes  of  the  struggle,  but  their  estates,  if 
conveyed  in  trust  for  their  families  to  some  lowly  non- 
combatant,  were  not  forfeited  thereby.  If  the  grantee, 
however,  proved  faithless  to  his  trust,  and  refused  to  al- 
low the  beneficiaries  to  receive  the  proceeds  of  the  prop- 
erty, the  latter  were  without  remedy  at  law.  This  rem- 
edy the  chancellor  began  to  give  by  ordering  the  grantee 
to  carry  out  his  moral  obligation  under  pain  of  imprison- 
ment. Upon  this  power  of  the  chancellor  is  founded  the 
whole  system  of  uses  and  trusts  that  was  and  is  of  such 
vast  importance  in  our  law.  The  growth  of  this  branch 
of  equity  is  fully  treated  in  the  article  on  Trusts  in  Vol- 
ume VI  of  this  work. 

As  the  number  of  such  cases  grew  it  became  necessary 
to  dispose  of  them  according  to  some  regular  judicial 
procedure,  and  thus  in  time  the  jurisdiction  of  the  chan- 
cellor became  that  of  a  regular  court  of  justice,  the  court 
of  chancery,  presided  over  by  the  chancellor  and  admin- 
istering rules  different  from,  but  existing  side  by  side 
with,  those  of  the  courts  of  common  law.  By  the  six- 
teenth century  this  result  had  been  reached. 

§  31.  Contest  between  chancery  and  common  law  courts. 
Not  only  did  the  chancellor  and  the  court  of  chancery 
exercise  a  new  jurisdiction  by  enforcing  rights  not  recog- 


xxxiv  INTRODUCTION 

nized  in  the  common  law  courts,  like  that  of  the  trust  in 
land  mentioned  in  the  subsection  above,  but  they  also  in- 
terfered with  the  exercise  of  admitted  common  law  rights, 
in  certain  cases  where  such  rights  were  being  unfairly  ex- 
ercised to  the  injury  of  another.  For  instance,  suppose 
A  obtains  from  B,  by  fraud,  a  bond  for  the  payment  of 
money.  The  possession  of  this  bond,  although  thus  ob- 
tained, gave  A  a  perfect  legal  right  to  collect  the  money 
in  a  suit  on  the  bond  in  the  common  law  courts— fraud 
not  being  a  defence  in  such  a  case.  From  the  fifteenth 
century,  however,  the  chancellor  would  enjoin  A  from 
collecting  a  bond  obtained  by  fraud,  and  imprison  him 
for  disobedience.  More  than  this,  the  chancellor  would 
even  forbid  the  execution  of  a  judgment  obtained  in  the 
common  law  courts  themselves,  if  it  was  gained  by  fraud. 
This  latter  jurisdiction  excited  great  opposition  from  the 
common  law  courts,  and,  after  a  controversy,  in  Parlia- 
ment and  out  of  it,  extending  over  more  than  a  century. 
Chief  Justice  Coke  attempted  in  1615  to  enlist  the  aid 
of  King  James  I  to  forbid  this  chancery  jurisdiction.  A 
commission,  to  which  the  matter  was  referred  for  investi- 
gation, reported  in  favor  of  the  chancellor's  practice. 
The  king  approved  the  report  and  thus  finally  settled  the 
dispute. 

§  32.    Development  of  equity  jurisdiction.    The  early 

chancellors,  in  the  formative  period  of  their  jurisdiction, 
necessarily  were  not  governed  by  fixed  rules  in  granting 
their  relief;  and,  for  various  reasons,  the  principles  upon 
which  they  acted  were  much  more  vague  and  ill-defined 
than  the  doctrines  of  the  common  law.    For  a  long  time 


INTRODUCTION  xxxv 

this  gave  point  to  the  jest  of  Selden,  that  "Equity  is  a 
roguish  thing,  varying  with  the  length  of  the  chancellor's 
foot."  After  the  restoration  of  Charles  II  to  the  throne, 
Lord  Nottingham  became  chancellor,  and  during  his  term 
of  office  the  principles  of  equitable  relief  were  so  sys- 
tematized and  explained  in  his  decisions  that  he  has  be- 
come known  as  the  ' '  Fathei  of  Equity. ' '  Two  other  great 
chancellors  contributed  notably  to  the  completion  of 
equity  as  a  system— Lord  Hardwicke  in  the  middle  of  the 
eighteenth  century,  and  Lord  Eldon  in  the  first  quarter 
of  the  nineteenth.  Under  the  latter  the  system  assumed 
its  final  form,  and,  since  his  time,  it  is  rare  that  courts 
of  equity  have  exercised  a  jurisdiction  more  extensive 
than  that  finally  established  by  Lord  Eldon. 

§  33.  Function  of  equity.  Not  only  did  equity  recog- 
nize and  enforce  useful  rights  unknown  to  the  common 
law,  but  it  supplemented  the  remedial  deficiencies  of  the 
older  system  in  many  ways  indispensable  to  the  needs 
of  modern  society.  The  common  law  had  almost  no  pre- 
ventive power;  it  could  only  redress  injuries  after  they 
had  occurred.  Equity  restrained  threatened  wrongs  by 
issuing  injunctions,  and  parties  were  thus  enabled  to 
have  their  rights  determined  in  advance  of  the  infliction 
of  actual  injury.  In  most  instances  the  common  law  did 
not  give  a  plaintiff  what  he  had  bargained  for,  but  only 
money  damages.  It  did  not  order  the  defendant  to  dis- 
charge any  duty  he  owed  the  plaintiff,  but  it  merely  gave 
such  reparation  as  could  be  gained  from  the  seizure  of 
the  defendant's  property.  Equity  ordered  the  defendant 
to  perform  his  obligation  in  many  cases  where  paying  for 


xxxvi  INTRODUCTION 

the  breach  of  it  would  not  amount  to  performance.  The 
common  law  could  not  deal  with  more  than  two  sets  of 
parties  in  a  single  litigation.  Cases  of  the  inter-related 
rights  of  several  persons,  as  in  cases  of  suretyship,  part- 
nership, and  bankruptcy,  could  not  be  adequately  handled 
in  a  common  law  court.  A  critically  situated  business 
could  not  be  nursed  along  by  a  receivership  at  common  law. 
No  judgment  could  be  given,  conditional  upon  the  per- 
formance of  future  acts  by  other  parties.  A  common  law 
judgment  was  either  absolutely  given  or  denied.  In  all 
of  these  respects  equity  afforded  flexible  remedies,  and  a 
procedure  that  adapted  itself  to  the  demands  of  business 
and  of  justice.  When  the  two  systems  were  finally  fused 
in  England,  in  the  latter  part  of  the  nineteenth  century, 
the  consolidating  statute  provided  that  wherever  the 
rules  of  law  and  of  equity  applicable  to  a  case  differed, 
the  equity  rule  should  be  administered  by  the  court.  A 
full  discussion  of  the  peculiar  doctrines  of  this  great 
companion  system  of  the  common  law  will  be  found  in  the 
articles  on  Equity  and  Trusts  in  Volume  VI  of  this 
work.  In  most  American  states  the  two  systems  of  law 
and  equity  are  administered  by  the  same  courts  and 
judges,  but  their  separate  doctrines  are  preserved  in  a 
manner  that  has  an  important  effect  upon  both  the  form 
and  substance  of  judicial  relief.  See  the  articles  on 
Equity  and  Trusts  in  Volume  VI,  and  on  Pleading  in 
Volume  XI  of  this  work. 


INTEODUCTION  xxxvii 

Section-  4.  Other  English  Legax.  Systems. 
§  34.  Admiralty  law.  Canon  law.  Law  merchant.  In 
addition  to  the  systems  of  common  law  and  equity,  there 
have  been  at  various  times  in  England  several  other  sys- 
tems of  law,  having  separate  courts  and  providing  differ- 
ent rules  from  the  courts  of  law  and  equity.  The  more 
important  of  these  were  admiralty  and  canon  law,  and 
the  law  merchant.  Admiralty  law  dealt  with  maritime 
affairs,  and  this  jurisdiction  is  still  preserved  distinct 
from  law  and  equity  in  both  England  and  the  United 
States.  In  this  country  it  is  exclusively  administered  by 
the  Federal  courts.  Canon  law  dealt  with  ecclesiastical 
affairs,  a  term  that  earlier  included  much  more  than  it 
does  now.  Marriage  and  divorce,  wills  of  personal  prop- 
erty, all  offences  against  morals— these  were  within  the 
early  jurisdiction  of  the  ecclesiastical  courts,  as  well  as 
matters  that  actually  concerned  the  church  and  ecclesias- 
tics. The  English  reforms  of  the  nineteenth  century 
swept  away  substantially  all  of  this  jurisdiction  except 
that  over  church  discipline.  In  America  there  are  no 
ecclesiastical  state  courts  because  there  is  no  official  or 
established  religion.  The  law  merchant  dealt  with  mer- 
cantile or  trade  affairs,  at  first  between  all  merchants, 
and  later  only  where  foreign  merchants  were  concerned. 
This  law  was  early  administered  in  England  by  local 
commercial  courts  in  the  port  towns  and  trade  centers. 
By  the  sixteenth  century,  however,  the  rules  of  the  law 
merchant  between  domestic  traders  had  been  absorbed 
into  the  common  law  system,  and  by  the  year  1700  the 
same  thing  had  happened  where  the  foreign  merchant 


xxxviii  INTRODUCTION 

was  concerned.    The  law  merchant  as  a  separate  system 
had  ceased  to  exist. 

Section  5.     Classical.  Legal  Literatuee. 

§35.    Early  legal  literature:    GlanviUe  and  Bracton. 

In  the  reign  of  Henry  II  was  written  the  first  general 
treatise  on  English  law,  probably  by  Glanville,  who  was 
Henry's  justiciar.  It  was  written  about  1187  and  deals 
with  the  law  administered  in  the  royal  courts.  A  book 
on  canon  or  ecclesiastical  law,  and  one  on  the  proceed- 
ings in  the  king's  exchequer  were  also  written  during 
this  reign.  About  seventy  years  later  another  general 
treatise  was  written  by  Bracton,  who  had  been  one  of  the 
royal  judges.  A  large  part  of  it  consists  really  of  Eoman 
law,  which  was  much  studied  under  Henry  III.  At  this 
time,  when  the  judges  were  largely  ecclesiastics,  learned 
in  both  the  canon  and  the  Eoman  law,  there  was  consid- 
erable likelihood  that  the  well  systematized  Roman  law 
would  largely  replace  the  confused  and  unorganized  Eng- 
lish common  law.  In  the  reign  of  Edward  I,  however, 
this  tendency  had  passed  away,  due  to  several  causes. 
Parliament  had  refused  to  alter  the  English  law  of 
legitimacy  to  correspond  with  the  Roman  law,  and,  in  re- 
fusing, had  said  they  did  not  wish  to  change  English  laws 
hitherto  used  and  approved.  This  doubtless  represented 
the  common  feeling  of  both  nobles  and  people.  In  Ed- 
ward's time,  church  officials  ceased  to  sit  in  the  king's 
courts  as  judges,  and  so  a  judicial  knowledge  of  the  Ro- 
man law  died  out.  Moreover,  the  extensive  legislation 
of  Edward's  time  so  altered  private  rights  as  greatly  to 


INTRODUCTION  xxxix 

increase  the  difficulty  of  applying  to  them  a  system  of  law 
created  without  reference  to  such  legislation.  Most  of 
the  Roman  law  in  Bracton  is  now  thought  not  to  have 
represented  the  law  actually  administered  in  English 
courts  of  his  day,  but  to  have  been  a  suggested  improve- 
ment. Where  Bracton  cites  actual  decisions  for  his 
statements  they  are  nearly  always  distinctly  English 
irather  than  Roman  law.  Probably,  therefore,  Roman  law 
never  actually  gained  much  foothold  in  the  English 
courts,  although  it  might  easily  have  done  so  under 
slightly  diiferent  circumstances.  Two  treatises  on  Eng- 
lish law  in  Edward  I 's  reign,  by  Britton  and  Fleta,  show, 
the  changes  that  took  place  in  that  period. 

§36.  Same:  Year  Books.  Littleton's  Tenures.  About 
the  same  time  (1290)  begins  the  series  of  Year  Books. 
They  are  brief,  informal  reports  of  cases  heard  in  the 
royal  courts.  Who  reported  them  and  under  what  au- 
thority is  doubtful,  and  they  are  of  very  uneven  value. 
They  usually  contain  a  statement  of  what  the  case  was 
about,  some  argument  of  counsel,  and  the  opinion  of  the 
court.  Colloquies  between  court  and  counsel  are  fre- 
quently reported,  sometimes  accompanied  by  lively  com- 
ments of  the  reporter.  These  reports  extend  from  the 
time  of  Edward  I  to  Henry  VIII,  a  period  of  nearly  two 
hundred  and  fifty  years.  They  are  written  in  the  law 
French  of  the  period,  and,  although  very  badly  edited, 
they  are,  with  the  four  general  treatises  above  mentioned 
and  Littleton's  Tenures,  our  principal  sources  of  knowl- 
edge of  the  English  common  law  to  the  time  of  Henry 
VIII.    The  last-named  book  is  the  famous  classic  upon 


xl  INTRODUCTION 

the  English  land  law  of  the  period.  It  was  probably  writ- 
ten about  1475,  and  was  printed  a  few  years  later,  being 
the  first  English  law  book  printed.  Seventy  editions  of 
it  were  published  in  one  hundred  and  fifty  years,  and 
then  appeared  Coke's  equally  famous  Commentary  upon 
the  Tenures.  The  new  work  also  ran  through  many  edi- 
tions and,  next  to  Blackstone's  Commentaries,  was  the 
most  notable  English  law  book  ever  published. 

§  37.  Lord  Coke.  Two  other  great  law  writers  of  a 
later  period  should  be  mentioned.  The  first  is  Sir  Edward 
Coke,  who  was  prominent  politically  and  judicially  dur- 
ing the  reigns  of  Elizabeth  and  James  I.  He  became  chief 
justice  of  England  and  was  removed  by  James  for  lack 
of  subserviency.  His  great  work  was  his  Commentary 
on  Littleton's  Tenures  mentioned  in  the  subsection  above, 
which  has  been  described  as  "a  stupendous  commentary 
which  contains  the  gleanings  of  a  peculiarly  laborious  life 
and  covers  almost  the  whole  domain  of  English  law.  Coke 
upon  Littleton,  unrivalled  among  law  books  for  vast  and 
various  learning,  has  a  curious  place  in  the  general  his- 
tory of  literature,  for  it  presents  the  most  conspicuous 
example  of  a  masterpiece  upon  a  masterpiece— much  as 
if  the  plays  of  Shakespere  were  entwined  about  the 
Canterbury  Tales"  (4j.  Treatises  upon  Magna  Charta 
and  other  legal  subjects,  and  eleven  volumes  of  reports, 
containing  the  important  cases  of  his  time,  are  Coke's 
principal  other  works.  His  reports,  particularly,  en- 
joyed an  enormous  prestige. 


(4)     Wambaugh,  Introduction  to  Littleton's  Tenures,  42. 


INTRODUCTION  xli 

§  38.  Blackstone.  Between  1765  and  1769  were  pub- 
lished the  four  volumes  of  Commentaries  on  the  Law  of 
England  by  William  Blackstone,  Viner  Professor  of  Eng- 
lish law  at  Oxford  University.  In  it  appeared,  for  the 
first  time,  a  thoroughly  clear  and  readable  account  of  the 
whole  field  of  English  law  as  it  existed  at  that  date.  No 
other  book  has  ever  so  popularized  the  study  of  law,  and 
for  a  hundred  years  it  was  the  principal  subject  of  study 
by  students  preparing  for  the  bar,  in  both  England  and 
America.  It  is  said  that  as  many  copies  were  sold  in 
the  American  colonies  before  the  Eevolution  as  in  Eng- 
land. The  work  exercised  great  influence  in  American 
courts  for  the  first  fifty  years  after  the  Revolution,  due 
to  its  own  merits  as  well  as  to  the  scanty  legal  libraries 
in  many  parts  of  this  country.  Its  authority  for  either 
student  or  lawyer  has  been  much  lessened,  today,  by  the 
considerable  changes  that  have  taken  place  in  the  law 
since  Blackstone 's  time,  and  by  the  work  of  legal  scholars 
who  have  shown  much  that  is  fictitious  in  its  legal  history 
and  reasoning.  It  is  still,  however,  the  great  work  upon 
the  English  common  law  of  the  eighteenth  century  before 
it  was  touched  by  the  hands  of  legal  reformers. 


CHAPTER  III. 

USE  OF  JUDICIAL  PRECEDENTS. 

§  39.    Occasion  and  mode  of  judicial  law-making.    As 

has  already  been  explained  (§§9-12,  above),  the  law  as 
enforced  in  the  courts  may  be  derived  from  custom,  from 
legislation,  or  from  judicial  precedents.  The  operation 
of  custom  and  of  legislation  has  already  been  explained, 
and  it  remains  to  discuss  law-making  by  judicial  prece- 
dent (1). 

A  court  must  decide  in  one  way  or  another  each  case 
brought  before  it,  and  it  must  decide  it  according  to  some 
general  rule,  which  is  the  quality  that  distinguishes  law 
from  individual  caprice.  The  court  may  find  this  general 
rule  in  some  acceptable  custom,  properly  proven;  or  it" 
may  find  it  in  some  act  of  legislation,  ranging  all  the  way 
from  a  constitution  to  a  municipal  ordinance  or  the  rules 
of  a  governmental  department  i  or  it  may  find  it  in  the 
precedent  established  by  the  former  decision  of  some 
similar  case.  Occasionally,  no  rule  applicable  to  the  pre- 
cise  case  before  the  court  can  be  discovered  from  these 
sources,  and  then  the  court  itself  must  establish  a  rule. 
Of  course  no  case  ever  arises  today  so  novel  that  it  can 
not  be  decided  by  analogy  to  some  existing  rule  of  law; 
but  cases  frequently  arise  where  there  are  conflicting 

(1)  The  topics  treated  in  this  chapter,  with  a  variety  of  related  mat- 
ters, are  very  fully  discussed  in  an  excellent  book,  The  Study  of  Cases, 
by  Professor  Eugene  Wambaugh  of  the  Harvard  Law  School. 

xlii 


INTRODUCTION  xUii 

analogies,  no  one  of  which  is  clearly  stronger  than  the 
others.  Here  the  court  must  decide  between  the  rival 
analogies,  and  in  so  doing  it  really  makes  a  new  rule  of 
law,  which  may  become  a  precedent  for  future  decisions 
upon  similar  cases.  Periods  when  social  conditions  are 
rapidly  changing,  from  whatever  reasons,  are  likely  to 
present  many  such  cases,  and  accordingly  we  find  that 
judicial  law-making  goes  forward  with  great  rapidity  at 
such  times.  Sometimes  social  changes  are  too  rapid  and 
too  great  to  be  successfully  met  by  such  changes  in  the 
law  as  courts  feel  at  liberty  to  make,  and  so  the  desired 
reforms  are  brought  about  by  legislation.  This  is  what 
commonly  happens  today,  and  important  changes  in  the 
law  by  judicial  decisions  are  now  rare,  though  small  ones 
are  constantly  made. 

§  40.  Same:  Illustration.  The  decisions  of  the  courts 
upon  the  right  to  use  the  earth  for  currents  of  electricity 
furnish  a  good  recent  illustration  of  how  judges  even  to- 
day may  make  important  rules  of  law.  Few  general  prin- 
ciples of  law  have  been  better  settled  than  the  absolute 
right  of  a  landowner  to  exclude  interference  with  his  pos- 
session, whether  upon  the  surface,  above  it,  or  below  it. 
Any  physical  intrusion  upon  the  air  space  over  his  land, 
or  under  ground,  even  though  imaccompanied  by  the 
slightest  damage,  was  deemed  sufficient  for  a  right  of 
action,  as  much  as  if  the  intrusion  was  upon  the  surface 
of  the  land.  Then  various  uses  of  electricity  were  dis- 
covered, among  them  the  telephone.  The  rather  feeble 
current  of  this  invention  was  used  over  the  wire  to  carry 
sound,  and  the  earth  was  used  for  the  return  current. 

Vol.  1—5 


xliv  INTRODUCTION 

When  the  electric  light  and  trolley  car  were  invented, 
their  very  powerful  currents  also  used  the  earth  for  their 
return;  and  they  interfered  with  the  telephone  current, 
and  even  affected  the  delicate  telephone  apparatus 
through  wires  of  the  latter  grounded  on  land  owned  by 
the  telephone  companies.  On  its  face,  it  looked  like  a 
clear  invasion  of  the  rights  of  a  landowner,  but  here  were 
two  great  conflicting  public  interests  to  be  adjusted.  It 
appeared  that,  by  the  use  of  an  extra  wire,  the  return 
current  of  either  the  telephone  or  the  trolley  wire  could 
be  carried  upon  a  metallic  circuit,  without  entering  the 
ground.  The  orthodox  analogies  were  in  favor  of  com- 
pelling the  trolley  companies  to  do  this,  as  they  seemed 
to  be  interfering  with  the  rights  of  others;  but  it  also 
appeared  that  this  was  a  far  more  expensive  matter  for 
the  trolley  companies  than  for  the  telephone  companies ; 
and  the  unknown  future  of  electric  power  transmission 
was  likely  to  be  burdened  with  a  similar  expense,  an  ex- 
pense that  in  all  cases  would  ultimately  be  borne  by  the 
public.  The  courts,  therefore,  decided  that  a  landowner 
could  not  claim  the  right  to  be  free  from  outside  electric 
disturbance  of  electric  currents  even  upon  his  own  land ; 
and  the  telephone  companies  have  been  obliged  to  put  in 
metallic  circuits  instead  of  the  trolley  companies  (2). 
Doubtless  a  similar  decision  will  be  reached  when  some 
landowner  tries  to  restrain  the  trespasses  of  flying- 
machines  so  far  aibove  the  surface  as  not  to  interfere  with 
the  use  of  his  lai&d. 


(2)    CuroberlaujJ  T?efg>ph.  Co.  v.  United  Elec.  Ry.  Co.,  42  Fed.  273. 


INTRODUCTION  xlv 

§  41.  Judicial  precedents  ordinarily  followed.  When, 
after  due  consideration,  a  court  has  laid  down  a  new  rule 
of  law,  as  explained  above,  it  will  ordinarily  follow  this 
rule  in  succeeding  cases  sufficiently  similar  in  their  facts 
to  seem  clearly  to  involve  the  same  principle.  That  is, 
the  rule  once  laid  down  in  a  decided  case  becomes  a 
precedent  for  future  decisions.  There  are  some  advan- 
tages, and  some  disadvantages,  in  this.  The  obvious  dis- 
advantage is  that,  as  precedents  accumulate,  the  law  be- 
comes constantly  less  flexible,  and  an  increasing  number 
of  changes  must  be  made  by  legislation.  Under  the  most 
intelligent  direction  it  is  often  difficult  to  frame  a  statute 
that  will  cover  no  more  and  no  less  than  was  intended; 
and  the  conditions  under  which  much  legislation  is  enacted 
in  this  country  are  unfavorable  to  a  high  degree  of  either 
care  or  skill  in  this  respect.  On  the  other  hand,  the  ad- 
vantage of  following  general  rules  laid  down  in  previous 
decisions  is  that  it  secures  some  degree  of  certainty  in 
the  unwritten  law.  A  known  rule,  though  not  the  best 
one  imaginable,  is  far  preferable  to  treating  each  case 
as  a  new  problem,  to  be  decided  as  may  appear  just  in- 
dependently of  all  that  have  preceded  it.  Men's  ideas 
differ  so  about  abstract  justice  that,  without  a  more 
definite  guide  than  this,  one  could  seldom  be  certain  what 
legal  consequences  would  flow  from  any  course  of  conduct. 

The  only  reasonable  alternative  to  following  judicial 
precedents  is  an  extensive  codification  of  the  law,  by  legis- 
lation which  shall  somewhat  minutely  define  all  of  the 
legal  rights  and  duties  of  men.  Such  a  code  is  of  course 
less  elastic  than  even  judge-made  law,  but  it  may  be  al- 


xlvi  INTRODUCTION 

tered  as  occasion  requires  by  new  legislation.  In  general 
it  may  be  thought  that  subjects  that  have  been  fully  de- 
veloped by  judicial  decisions  may  be  advantageously 
codified,  while  subjects  that  are  still  in  the  formative 
stage  may  well  be  left  for  the  courts  to  work  out  their 
details. 

§  42.  How  far  decisions  create  precedents.  Illustra- 
tions. In  English  and  American  law  the  doctrine  has  been 
well  settled,  for  over  six  hundred  years,  that  decisions 
create  precedents  which  the  courts  are  ordinarily  bound 
to  follow  as  the  existing  law.  This  is  called  the  principle 
of  "stare  decisis"  (abide  by  what  has  been  decided).  It 
is  highly  important,  therefore,  to  understand  just  how 
far  a  decision  has  this  binding  force.  Each  decision  pur- 
ports to  be  made  as  a  result  of  the  application  of  some 
general  rule.  It  is  the  general  rule,  then,  that  becomes 
a  precedent.  Is  this  general  rule  to  be  accepted  as  the 
court  states  it,  or  is  it  to  he  determined  by  other  tests? 

Suppose  A  is  attacked  by  X's  dog,  where  he  might 
avoid  injury  by  leaping  a  fence  or  shutting  a  door.  In- 
stead, he  stands  his  ground  and  kills  the  dog,  whose 
owner  sues  A.  Suppose  the  court  decides  in  favor  of  A, 
giving  as  a  reason  that  to  save  himself  or  his  property  a 
man  may  destroy  whoever  or  whatever  is  invading  his 
rights.  Does  this  decision  become  a  precedent  for  the 
entire  rule  laid  down  by  the  judge;  so  as,  for  instance, 
to  cover  the  case  of  A,  when  attacked  by  X*s  horse,  or  by 
X;  or  of  A's  dog,  when  attacked  by  X's  dog,  or  horse, 
or  by  X  himself?  Now,  while  these  other  cases  bear  some 
general  resemblance  to  the  original  case,  most  of  them 


INTRODUCTION  xlvii 

involve  additional  circumstances  of  sufficient  importance 
so  that  they  might  reasonably  be  decided  differently  from 
the  first  case,  granting  the  correctness  of  that.  A  man 
may  well  be  allowed  more  latitude  in  defending  himself 
than  his  property;  and  more  in  defending  himself  from 
an  animal  than  from  a  human  being.  The  general  propo- 
sition laid  down  by  the  court  above  is  much  wider  than  is 
necessary  properly  to  decide  the  original  case;  and  it  is 
a  salutary  rule  of  precedent-making  that  a  court  can  give 
no  binding  force  to  a  rule  wider  than  is  fairly  necessary 
to  decide  the  actual  case  before  it. 

How  wide  a  rule  is  fairly  necessary  to  the  decision  of 
the  case  just  put?  Suppose  A  were  attacked  by  X's  cat 
instead  of  his  dog,  would  the  decision  in  the  dog  case 
control  the  cat  case?  Or  suppose  he  were  attacked  by 
Y's  dog  instead  of  X's,  or  by  a  different  kind  of  a  dog 
belonging  to  X?  Clearly  the  precedent  is  wide  enough 
to  cover  any  owner,  and  any  dog  large  enough  to  threaten 
real  injury.  Conceivably,  a  mere  puppy  might  be  outside 
the  precedent.  Likewise,  it  is  pretty  certain  that  any 
animal  somewhat  similar  to  a  dog  in  value  or  usefulness 
would  be  included  by  the  precedent.  When  we  put  the 
case  of  A's  being  attacked  by  X's  horse  and  able  to  save 
himself  by  a  slight  exertion,  instead  of  which  he  kills  the 
horse,  we  face  a  harder  question.  Horses  are  usually 
more  valuable  and  more  useful  animals  than  dogs,  and 
hence  may  be  entitled  to  more  consideration.  There  will 
be  room  for  reasonable  difference  of  opinion  as  to  whether 
the  horse  case  was  fairly  within  the  precedent  of  the 
dog  case.    Clearly  A  couldn't  kill  X  himself  to  avoid  a 


xlviii  INTRODUCTION 

slight  injury,  which  he  could  escape  entirely  by  slight 
exertion. 

§  43.  Same:  Conclusion.  From  the  above  considera- 
tions it  appears  that  one  may  say,  roughly,  that  a  case 
becomes  a  precedent  only  for  such  a  general  rule  as  is 
necessary  to  the  actual  decision  reached,  when  shorn  of 
unessential  circumstances.  In  the  illustration  given 
above,  the  name  of  the  owner  and  the  fact  that  the  animal 
was  a  dog  instead  of  a  cat  are  unessential  circumstances. 
The  change  from  a  dog  to  a  horse  may  be  sufficiently  great 
to  be  essential,  and  so  on.  The  illustration  also  shows 
how  difficult  it  may  be  to  decide  how  much  ground  a 
precedent  really  covers,  and  gives  an  indication  of  the 
large  scope  presented  for  the  exercise  of  ingenious  legal 
argument  and  judicial  common  sense  in  construing  and 
applying  precedents.  It  is  this  that  is  the  peculiar  task 
of  the  lawyer  and  the  judge. 

§  44.  Same:  Several  questions  in  a  case.  The  matter 
may  be  much  further  complicated,  if  there  are  several 
doubtful  points  of  law  in  a  case  instead  of  merely  one. 
Suppose,  in  the  case  already  put,  that  A  was  in  his  own 
door-yard  when  X's  dog  attacked  him,  and  suppose  also 
that  X  had  set  the  dog  upon  A  in  order  to  rob  him.  In 
addition  to  the  general  proposition  that  a  man  might  kill 
a  dog  anywhere  to  protect  himself  from  a  wrongful  attack, 
it  might  be  argued  that  he  had  this  right  when  attacked 
on  his  own  premises,  and  that  he  had  it  when  preventing 
a  felony.  Suppose  the  court  decides  that  all  three  propo- 
sitions are  correct,  for  how  much  will  the  decision  be  a 
precedent?     Inasmuch  as  the  first  proposition  includes 


INTRODUCTION  xlix 

both  of  the  others,  it  is  evidently  wider  than  is  necessary 
for  the  decision  of  the  case,  and  the  case,  therefore,  ceases 
to  be  a  precedent  for  the  wider  rule.  The  last  two  propo- 
sitions do  not  necessarily  include  each  other,  but  either 
one  alone  would  be  sufficient  for  the  decision.  Neither 
one,  therefore,  is  alone  necessary  for  the  decision,  and 
so  neither  one  is  of  full  binding  force  as  an  authority  for 
future  cases ;  though  both  are  entitled  to  a  certain  amount 
of  respectful  consideration. 

§  45.  Same :  Dicta.  A  statement  of  law  by  a  court,  lay- 
ing down  a  rule  wider  than  is  required  by  the  particular 
case  before  the  court,  is  called  a  dictum  (plural  dicta) y 
and  the  same  tenn  is  applied  to  any  statement  of  law  not 
necessarily  connected  with  some  point  actually  involved 
in  the  case.  Dicta,  while  not  treated  as  precedents,  are 
given  some  consideration  in  the  decision  of  future  cases, 
depending  upon  the  reputation  and  rank  of  the  court  or 
judge  uttering  them,  and  upon  the  amount  of  delibera- 
tion with  which  they  were  uttered.  Where  a  case  involves 
several  points,  and  the  decision  is  placed  upon  more  than 
one  of  them  by  the  court,  each  point  may  have  only  the 
future  weight  of  a  dictum,  though  it  is  perhaps  not  strictly 
to  be  called  such. 

§  46.  When  precedents  may  be  overruled.  Although 
courts  usually  follow  the  precedents  of  former  decisions, 
they  are  not  absolutely  bound  to  do  so,  and  sometimes 
they  do  not.  There  may  be  a  variety  of  reasons  for  this. 
Where  the  precedents  are  not  clear,  or  have  been  con- 
flicting, they  may  be  disregarded  with  considerable  free- 
dom.   Perhaps  this  might  better  be  called  a  case  where 


1  INTRODUCTION 

no  real  precedent  exists.  A  real  precedent,  however,  may 
be  disregarded  if  it  has  become  obsolete  through  lapse 
of  time  and  changed  conditions.  In  this  respect  precedent 
law  differs  from  statute  law,  which,  in  English  and 
American  practice  remains  operative  until  repealed. 
More  frequently,  a  precedent  may  be  overruled  where  a 
subsequent  court  is  clearly  convinced  that  it  was  founded 
upon  wrong  reasoning;  especially  when  the  previous  error 
was  due  to  insufficient  argument,  mistake  as  to  the  pre- 
vious condition  of  the  law,  peculiar  circumstances  sur- 
rounding a  case,  or  to  some  inadvertence  which  prevented 
proper  deliberation  after  full  information.  Cases  are 
almost  never  overruled  when  the  result  would  be  either 
to  create  or  increase  criminal  liability,  or  to  take  away 
vested  property  rights.  Changes  in  these  matters  are 
left  to  the  legislature. 

§  47.  Precedents  from  other  jurisdictions.  Decisions 
have  binding  force  as  precedents  only  in  the  jurisdiction 
in  which  they  are  rendered.  Thus,  an  Illinois  court  is  not 
bound  to  follow  the  precedents  established  by  Indiana  or 
New  York  courts,  inasmuch  as  these  precedents  make  the 
law  of  Indiana  and  New  York  only.  Where  an  unsettled 
question  arises,  however,  for  which  there  are  no  decisive 
precedents  in  Illinois,  the  courts  of  that  state  will  give 
considerable  weight  to  the  precedents  of  other  jurisdic- 
tions having  a  similar  system  of  law.  Where  the 
precedents  of  other  jurisdictions  are  conflicting,  the  fact 
that  the  '' weight  of  authority"  in  number  or  reputation 
of  jurisdictions  is  one  way,  rather  than  the  other,  is 
usually  given  consideration.    The  precedents  of  courts  of 


INTRODUCTION  li 

well-known  strength,  like  the  higher  courts  of  the  United 
States,  England,  Massachusetts,  or  New  York,  have  great 
influence  outside  of  their  own  jurisdictions.  The  un- 
written law  of  all  our  American  states,  except  Louisiana, 
is  derived  from  the  English  common  law,  and  is  so  much 
the  same  throughout  the  country  that  in  every  state 
precedents  from  other  states  and  from  England  are  freely 
used  in  argument  and  decision  by  lawyers  and  judges. 
United  States  Supreme  Court  decisions  and  English  de- 
cisions are  more  frequently  cited  outside  of  their  own 
jurisdictions  than  are  those  of  any  of  the  state  courts. 
A  writer  upon  American  law  in  general  may  thus  draw 
his  illustrations  and  precedents  from  any  higher  court  in 
England,  America,  or  Canada,  choosing  those  most  suit- 
able for  the  purpose,  wherever  he  finds  them,  and  they 
will  bo  accepted  evorywliorc  as  entitled  to  respectful  con- 
sideration. Throughout  this  work,  for  instance,  though 
it  aims  to  state  the  rules  of  American  law,  yet  leading 
English  cases  are  freely  used  for  purposes  of  illustration 
and  citation.  It  goes  without  saying  that  this  wide  source 
from  which  precedents  may  be  gathered  greatly  increases 
the  task  of  American  judges  and  lawyers  in  thoroughly 
investigating  doubtful  (juestions  of  importance. 

§  48.  How  precedents  are  collected  and  cited.  Inas- 
much as  every  judicial  decision  may  create  a  precedent, 
the  collecting  and  indexing  of  such  decisions  is  a  matter 
of  great  importance.  The  original  trial  of  a  case  usually 
takes  place  before  a  single  judge,  with  or  without  a  jury, 
and  points  of  law  involved  are  argued  before  and  de- 
cided by  this  judge,  in  the  first  instance.    Such  decisions 


Hi  INTRODUCTION 

are  seldom  reported,  as  not  much  deliberation  can  be  had 
in  the  heat  of  a  trial.  The  more  important  points  of  law 
are  usually  appealed  to  a  higher  court,  and  carefully 
argued  before  a  bench  of  judges  who  decide  them  after 
careful  deliberation.  These  decisions  of  appellate  courts 
are  collected  and  published  in  book  form,  there  being  one 
or  more  series  of  such  reports  for  each  state.  Formerly 
the  series  was  commonly  published  under  the  reporter's 
name,  as  Pickering's  reports  in  Massachusetts,  and 
Johnson's  reports  in  New  York.  Of  late  years,  however, 
these  series  are  generally  known  by  the  name  of  the  state 
whose  decisions  are  reported,  as  Massachusetts  reports 
and  New  York  reports.  In  citing  a  case,  the  name  of  the 
case  is  given,  followed  by  the  volume  and  page  of  the 
report.  Thus,  Gillet  v.  Phillips,  13  N.  Y.  114,  refers  to 
the  case  of  Gillet  against  Phillips  to  be  found  in  volume 
13  of  the  New  York  reports  at  page  114;  similarly.  United 
States  V.  Hudson,  7  Cranch  32,  refers  to  that  case  in 
volume  7  of  Cranch 's  reports  at  page  32.  Before  1865, 
the  English  reports  were  all  cited  by  the  name  of  the  re- 
porter ;  since  that  time  they  are  cited  by  the  name  of  the 
court,  as  4  Q.  B.  D.  16,  which  means  volume  4  of  the 
Queen's  Bench  Division  reports,  page  16;  and  latterly 
they  are  cited  by  the  year  as  well  as  by  the  court,  as  [1903] 
1  K.  B.,  which  means  the  first  volume  of  King's  Bench 
reports  published  in  1903. 

In  addition  to  the  official  reports  of  decisions  in  this 
country,  there  is  an  excellent  unofficial  series  called  the 
National  Reporter  System.  The  states  are  divided  into 
seven  or  eight  geographical  groups,  and  all  of  the  de 


INTRODUCTION  liii 

cisions  in  each  group  are  published  in  a  single  series 
called,  for  instance,  the  Northeastern  Reporter  or  the 
Northwestern  Reporter,  according  to  the  locality  of  the 
states  in  that  group. 

At  the  head  of  each  case  in  the  reports  is  printed  a 
brief  abstract  of  it,  showing  what  it  is  about  and  what 
propositions  of  law  are  laid  down  in  it.  This  abstract 
is  called  a  head-note.  The  points  of  law  in  each  volume 
are  classified  under  an  index-digest  at  the  end  of  the 
volume,  and,  at  short  intervals,  all  of  the  points  decided 
in  each  state  are  brought  together  in  a  state  digest,  which 
is  kept  up  to  date  by  frequent  revisions.  Similarly,  an 
exhaustive  national  digest  (the  Century  Digest)  has  been 
published  and  is  being  continued  (the  Decennial  Digest). 
By  these  and  similar  devices,  the  enormous  mass  of  judi- 
cial precedents  is  sifted,  classified,  and  placed  at  the  dis- 
posal of  the  legal  profession.  The  magnitude  of  the  task 
may  be  imagined  when  one  learns  that  more  than  three 
quarters  of  a  million  cases  have  been  classified  as  judicial 
precedents  in  the  present  national  digests.  The  work  has 
been  so  well  done,  however,  that  it  is  quite  possible,  by 
diligent  search,  to  collect  substantially  all  of  the  important 
cases  ever  decided  upon  any  desired  point  of  law. 

§  49.  Statutes.  After  a  statute  has  been  passed  by  a 
legislative  body,  it  must  be  construed  and  applied  by  the 
courts  like  any  other  rule  of  law.  "Where  the  language 
is  ambiguous,  a  definite  construction  must  be  put  upon  it, 
if  required  for  the  decision  of  some  pending  case;  and 
this  construction  then  becomes  a  precedent  to  be  followed, 
distinguished,  qualified,  or  perhaps  overruled,  just  as  a 


liv  INTRODUCTION 

common  law  precedent  would  be.  There  are  even  certain 
rules  of  law  applicable  to  the  construction  of  statutory  law 
itself,  which  are  ordinarily  followed  by  the  courts.  See 
the  article  on  Statutory  Construction  in  Volume  XIV  of 
this  work. 


CONTRACTS, 


BT 


HARRY  SANGER  RICHARDS, 

Ph.  B.,  Iili.  D.  (State  University  of  Iowa) 
lili.  B.    (Harvard  University) 

Dean  of  College  of  Law,  University  of  Wisconsin. 


CHAPTKB  I. 
PRELIMINARY  TOPICS. 

Section  1.    Classification  of  Eights. 

§  1.  Absolute  and  relative  rights.  For  the  purpose  of 
indicating  the  relation  which  contract  bears  to  other 
rights  recognized  in  law,  it  is  convenient  to  divide  rights 
into  two  classes:    absolute  rights  and  relative  rights  (1). 

An  absolute  right  is  one  that  accrues  to  one  by  virtue  of 
being  a  citizen  of  the  state,  or  by  reason  of  the  ownership 
of  property,  or  as  incident  to  a  status.  Thus  every  citizen 
has  the  right  to  personal  freedom  and  to  reputation.  If 
the  owner  of  property,  he  has  the  right  to  enjoy  its  profits, 

(1)     1  Bl.  Com.  pp.  123-129. 


2  CONTRACTS 

and  hold  it  free  from  injury  by  others.  If  he  occupies  the 
status  of  marriage  or  the  head  of  a  family,  he  has  all  the 
rights  that  are  incident  to  that  status  (2). 

Eelative  rights  on  the  other  hand  arise  to  a  person,  not 
by  reason  of  holding  property  or  being  a  citizen,  but  by 
virtue  of  some  agreement  to  which  he  is  a  party,  either  as 
a  result  of  an  express  agreement,  or  by  virtue  of  some  im- 
plication of  law.  Eelative  rights  are  measured  by  the 
scope  of  the  specific  agreement  or  undertaking,  whereas 
absolute  rights  come  into  being  not  as  a  result  of  a  speci- 
fic undertaking  but  as  an  incident  to  the  person  or  prop- 
erty or  status  of  the  citizen. 

§  2.  Claasification  of  relative  rights.  Relative  rights 
may  in  turn  be  divided  into  those  based  upon  an  agree- 
ment in  the  strict  sense  of  the  term,  and  secondly,  those 
obligations  that  are  not  based  on  agreement,  but  which 
the  law  enforces  as  if  they  were  agreements  under  the 
general  title  of  Quasi  Contracts,  or  contracts  implied  in 
law. 

Obligations  based  on  agreement  embrace  two  distinct 
classes:  (a)  agreements  containing  a  promise  as  a  princi- 
pal part ;  and  (b)  agreements  not  containing  a  promise  as 
a  principal  part.  The  second  group  embraces  all  cash 
sales,  gifts,  etc.  Thus  A  goes  into  a  store  and  buys  an 
article  which  is  handed  to  him  in  return  for  the  price. 
While  the  transaction  is  the  result  of  an  agreement,  and 
the  agreement  is  the  basis  of  the  transfer  of  rights,  a 
promissory  obligation  does  not  result.  If  instead  of  pay- 
ing cash,  A  promises  to  pay  the  price  at  a  later  day,  the 


(2)     Holland,  Jurisprudence  (9  ed.),  160,  194,  164. 


CONTRACTS  3 

title  to  the  article  passes  and  B  receives  for  it  the  promise 
of  A  to  pay.  This  transaction  falls  within  the  first  class 
of  agreements,  and  is  an  example  of  a  true  contract  (3). 

Section  2.    Historical  Development  of  Contracts. 

§  3.  Primitive  law.  The  first  concern  of  the  primitive 
law  was  the  protection  of  the  absolute  rights  of  the  citizen 
with  respect  to  his  person  and  property.  Hence  we  find 
that  the  law  of  crimes,  which  determines  the  penalty  im- 
posed.by  the  state  for  injuries  to  the  person  and  property, 
and  the  law  of  torts,  which  governs  the  civil  liability  for 
injuries  to  person  and  property,  held  an  important  place 
in  the  law,  while  the  law  of  contracts  was  still  rudimen- 
tary. The  law  of  contracts  had  its  beginning  subsequent 
to  the  Norman  Conquest.  A  long  period  still  was  to  elapse 
before  the  existence  of  any  general  notions  of  a  promise 
or  agreement,  as  a  source  of  civil  obligation.  Promises 
were  made  and  performed,  no  doubt,  but  they  depended 
for  their  observance  upon  religious  oaths  and  forms,  and 
not  upon  legal  sanctions  (4). 

The  relatively  slow  development  of  contract  law  was 
due  also  no  doubt  to  the  simple  needs  of  primitive  society. 
Commerce,  as  we  know  it,  did  not  exist.  All  trade  was 
merely  barter,  the  exchange  of  one  man's  goods  for  the 
goods  of  another.  In  transactions  of  this  sort,  credit  had 
no  place,  nor  was  there  need  for  promises  as  to  future  acts. 
Obligations  there  were  which  the  law  recognized,  but  they 
depended  for  their  validity  on  the  ceremonies  and  oaths 


(3)  Holland,  Jurisprudence  (9  ed.),  242. 

(4)  2  Pollock  &  Maitland,  History  of  English  Law,  182  ft. 


4  CONTRACTS 

that  attended  their  formation,  and  not  upon  promises  (5). 
Commerce  developed  as  a  result  of  security  to  person  and 
property,  which  the  growing  stability  of  the  primitive 
state  brought  about,  and  the  law  of  contracts,  as  we  have 
it,  has  developed  in  response  to  the  commercial  needs  of  a 
highly  civilized  people. 

Section  3.     Classification  of  Contracts. 

§  4.  Contracts  and  quasi  contracts.  A  distinction  must 
be  drawn  between  true  agreements,  the  result  of  volun- 
tary and  intentional  assent  to  an  obligation,  and  obliga- 
tions which  the  law  imposes  where  one  man  has  profited 
at  the  expense  of  another  under  circumstances  that  in 
justice  call  for  a  readjustment  of  rights.  This  latter  class 
is  known  as  implied  or  quasi  contracts.  The  classifica- 
tion of  this  class  of  obligations  as  contracts  was  due  to 
the  inelasticity  of  the  common  law  procedure.  The  prom- 
ise assumed  is  a  mere  fiction,  designed  to  give  the  injured 
party  the  benefit  of  the  common  law  action  for  the  en- 
forcement of  contracts.  The  only  point  of  resemblance  to 
a  true  contract  is  this  common  remedy. 

§  5.  Formal  and  informal  contracts.  With  respect  to 
form,  true  contracts  are  divided  into  formal  and  informal. 
Formal  contracts  include  recognizances,  agreements  under 
seal,  and  possibly  bills  of  exchange.  A  recognizance  is  an 
acknowledgment  of  a  debt  before  a  court  or  officer  of  the 
court  entered  on  the  records  of  the  court.  The  most  com- 
mon modem  examples  of  this  obligation  are  bonds  given 
for  appearance  in  court  or  to  keep  the  peace.    Judgments 


(5)     Ibid,  184  ft. 


CONTRACTS  5 

of  courts  of  record  are  frequently  classed  as  formal  con- 
tracts, and  may  be  sued  upon  as  contracts,  but  they  are 
not  true  contracts  since  the  obligation  is  imposed  by  law, 
and  not  by  agreement  of  the  parties.  The  characteristic 
feature  of  a  formal  contract  is  that  it  derives  its  force 
from  the  formal  character  of  the  act  creating  the  obliga- 
tion (6). 

Informal  contracts  embrace  all  other  classes  of  agree- 
ments whether  in  writing  or  oral,  and  are  usually  denomi- 
nated parol  contracts. 

§  6.  Express  and  implied  contracts.  Where  the  con- 
tract is  written  or  expressed  in  terms  at  the  time  of  mak- 
ing, it  is  known  as  an  express  contract. 

When  the  parties  have  not  framed  their  promises  in  ex- 
press terms,  and  it  is  necessary  to  consider  not  only  their 
statements,  but  their  conduct  as  well  in  determining  their 
obligation,  the  contract  is  said  to  be  implied  in  fact.  When 
the  obligation  is  imposed  by  law  without  reference  to  the 
specific  undertaking  of  the  parties,  it  falls  within  the 
class  known  as  quasi  contracts  already  referred  to. 

§  7.  Executed  or  executory  contracts.  Before  the  par- 
ties have  completed  performance  under  a  contract,  it  is 
known  as  an  executory  contract;  when  performance  is 
complete,  it  is  known  as  an  executed  contract.  An  exe- 
cuted contract  has  no  legal  significance.  The  purpose  of 
the  agreement  is  fulfilled  when  performance  is  complete 
and  the  contract  expires.  Where  one  party  has  performed 
on  his  part,  the  contract  is  of  course  executed  as  to  him, 
but  executory  as  to  the  other  party. 


(6)     Harriman,  Contracts  (2  ed.).  Sec.  4. 

Vol  1—6 


6  CONTRACTS 

§  8.  Bilateral  and  unilateral  contracts.  ' '  A  bilateral 
contract  is  one  which  is  to  be  performed  on  each  side  at 
some  future  time"  (7).  Thus  A  promises  to  sell  a  watch 
to  B  for  $50,  and  B  promises  to  pay  $50  therefor.  The 
contract  is  executory  on  both  sides.  "A  unilateral  con- 
tract is  one  in  which  one  of  the  parties  performs  at  the 
moment  when  the  other  promises  to  perform"  (7). 
Thus,  if  B  promises  to  pay  A  $50  if  A  will  deliver  a  watch 
to  B,  and  A  delivers  the  watch,  A  obtains  the  promise  of 
B  to  pay  $50  in  return  for  the  watch.  The  contract  is 
executed  as  to  A  and  executory  as  to  B.  Insurance  poli- 
cies, debts,  and  promissory  notes  are  examples  of  uni- 
lateral contracts. 


(7)     Laagdell,  Summary  of  Contracts,  Sec.  183. 


PART   1. 
FORMATION  OF  CONTRACTS. 

CHAPTER  II. 
OFTBR  AND  ACCEPTANCE. 

§  9.  Contract  defined.  A  contract  in  the  modem  sense 
has  been  defined  as  an  agreement  containing  a  promise 
enforceable  in  law  (1).  An  analysis  of  this  definition  will 
show  its  scope  and  limitation.  The  term  "agreement" 
implies  that  there  are  at  least  two  parties  involved,  since 
one  party  can  not  agree  to  a  proposition  unless  it  is  made 
to  him  by  another.  The  term  "agreement"  further  im- 
plies that  one  party  makes  a  proposal  or  offer  to  which 
the  other  party  assents,  hence  agreement  is  reducible  to 
offer  and  acceptance. 

§  10.  Agreement  must  contain  a  promise.  This  agree- 
ment must  be  something  more  than  assent  to  some  gen- 
eral proposition  such  as:  "The  world  is  round."  It 
must  contain  a  promise.  Thus  if  A  says  to  B:  "The 
world  is  round,"  and  B  replies:  "I  assent  to  that,"  we 
have  an  agreement,  but  it  is  of  no  legal  significance.  If, 
however,  A  says  to  B,  "  I  will  promise  to  do  thus  and  so, 
if  you  will  promise  to  do  thus  and  so,"  and  B  assents,  we 
have  an  agreement  which  contains  promises  from  A  to  B 
and  B  to  A. 


(1)     Wald's  Pollock,  Contracts    (Williston's  ed.),  7. 


8  CONTRACTS 

§  11,    Promise  must  be  enforceable  in  law.    It  will  be 
observed  from  the  definition  that  a  contract  is  not  only 
an  agreement  containing  a  promise,  but  it  must  be  one 
that  is  enforceable  in  law.    Many  agreements  which  con- 
tain promises  are  of  no  validity  in  law  for  the  reason  that 
they  are  not  intended  by  the  parties  to  create  legal  obli- 
gations.   Ordinarily,  social  agreements  are  of  this  nature. 
Thus,  if  A  invites  a  friend  to  dinner,  and  he  accepts,  we 
have  an  agreement  in  proper  form,  but  the  failure  to  at- 
tend the  dinner  or  a  failure  to  give  the  dinner  involves  no 
legal  consequence.    Again,  the  parties  may  have  entered 
into  an  agreement  which  in  form  is  legal,  but  which  the 
parties  do  not  intend  to  be  binding.    This  class  of  cases  is 
illustrated  by  Keller  v.  Holderman  (2).    A  gave  his  check 
for  $300  to  B  for  an  old  silver  watch  worth  perhaps  $15. 
B  presented  the  check  to  the  bank  and  it  was  not  paid ;  he 
then  brought  suit  against  A.    It  appeared  that  the  whole 
transaction  was  a  joke,  and  neither  party  intended  a  legal 
obligation.     Accordingly,  the  court  dismissed  the  suit. 
The  rule  laid  down  in  this  case  applies  to  all  cases  where 
the  parties  do  not  intend  a  legal  obligation,  although  in 
form  they  have  created  one. 

§  12.  Motive  is  not  material.  The  motives  which  in- 
duce parties  to  make  a  contract  are  as  a  rule  not  material 
as  long  as  they  intend  to  make  a  binding  agreement.  This 
is  illustrated  by  the  celebrated  case  of  Williams  v.  Car- 
wardine  (3).  In  this  case  one  A  offered  a  reward  for  in- 
formation leading  to  the  conviction  of  a  murderer.     B 


(2)  11  Mich.  248. 

(3)  4  B.  &  Ad.  621. 


FORMATION  OP  CONTRACTS  9 

gave  the  information  and  brought  suit  to  recover  the  re- 
ward. It  was  alleged  by  A  that  B  gave  the  information 
because  of  a  desire  to  be  revenged  for  a  wrong  done  to  B 
by  the  murderer,  and  not  to  secure  the  reward.  But  the 
court  held  that  this  was  immaterial,  since  it  appeared  that 
the  information  was  given  in  response  to  the  offer  of  a 
reward  with  intent  to  claim  the  same.  Parties  enter  into 
contracts  for  a  variety  of  reasons,  and  in  accordance  with 
the  rule  of  the  above  case,  the  law  is  not  concerned  with 
the  motive,  but  considers  only  the  question  whether  or 
not  an  offer  has  been  made  and  accepted. 

§  13.  Meeting  of  minds.  In  order  that  there  may  be  an 
agreement,  it  is  necessary  that  the  minds  of  both  parties 
shall  coincide  with  respect  to  every  material  term  of  the 
alleged  agreement.  K  one  party  has  in  mind  one  thing 
as  the  subject  matter  of  a  contract,  and  the  other  party 
has  in  mind  a  different  thing,  it  will  be  impossible  to  say 
that  they  are  in  agreement.  Thus,  in  the  case  of  Baffles 
v.  Wichelhaus  (4),  the  agreement  was  to  buy  and  sell  a 
cargo  of  cotton  to  arrive  by  the  ship  "Peerless"  from 
Bombay.  It  appeared  that  there  were  two  vessels  named 
** Peerless,"  one  sailing  in  October  and  one  in  December, 
and  the  plaintiff  had  one  vessel  in  mind,  and  the  defend- 
ant, the  other.  The  court  accordingly  held  that  the  par- 
ties had  never  agreed  on  the  same  thing  and  there  was  no 
contract. 

Again  the  parties  may  fail  to  agree  by  reason  of  the 
fraud  or  deceit  practiced  upon  one  of  the  parties  by  the 
other  party,  so  that  one  party  signed  an  entirely  different 


(4)     2  Hurl.  &  Colt  906. 


10  CONTRACTS 

agreement,  or  did  an  entirely  different  act  from  the  one  he 
intended.  In  Foster  v.  MacKinnon  (5)  A  signed  an  instru- 
ment represented  by  B  to  be  a  guaranty  similar  to  papers 
he  had  signed  on  previous  occasions.  As  a  matter  of  fact 
the  instrument  signed  was  a  bill  of  exchange.  The  jury 
found  that  A  was  not  negligent.  It  was  held  that  A 
was  not  liable,  since  he  could  truthfully  say  that  he  had 
never  agreed  to  become  liable  on  a  bill  of  exchange.  If, 
however,  A  had  been  negligent  in  signing,  that  is,  if  he 
had  signed  the  instrument  without  investigation  as  to 
its  character,  and  it  had  afterwards  come  into  the  hands 
of  a  person  who  had  purchased  it  in  good  faith,  the  de- 
fendant would  be  liable,  not  because  of  a  contract,  since 
there  would  be  none,  but  because  his  negligence  had 
made  possible  the  loss  to  the  present  holder. 

The  same  rule  is  illustrated  in  cases  where  a  party  in- 
tends to  make  a  particular  contract,  but  thinks  he  is  deal- 
ing with  a  person  other  than  the  one  with  whom  he  makes 
the  contract.  The  courts  hold  in  these  cases  that  a  valid 
contract  exists  provided  he  deals  face  to  face  with  the 
party.  Thus,  A  comes  to  B  and  states  that  he  is  C,  a  man 
of  established  credit,  when  in  fact  he  is  not.  B,  relying  on 
the  statement,  sells  goods  to  A  on  credit,  which  A  sells  to- 
D,  who  buys  in  good  faith.  B  can  not  recover  the  goods 
from  D,  because  he  did  intend  to  sell  to  the  very  person 
with  whom  he  made  the  agreement,  although  he  was  in- 
duced to  sell  to  him  by  reason  of  the  belief  that  the  person 
was  C.  He,  therefore,  is  not  in  a  position  to  say  as  in  the 
preceding  case  that  he  did  not  make  the  contract,  since  he 


(5)     L.  R.  4  C.  p.  704. 


FORMATION  OF  CONTRACTS        11 

did  intend  to  sell  to  A  (6).  If,  on  the  other  hand,  A  had 
written  to  B  making  exactly  the  same  representation  that 
he  was  C,  and  B  had  sent  the  goods  addressed  to  C,  which 
A  came  into  possession  of,  B  could  recover  the  goods  since 
he  never  intended  to  make  a  contract  with  A,  and  never 
had  A  in  mind  when  he  made  the  agreement  or  when  he 
shipped  the  goods  (7). 

Where  one  party  had  previously  dealt  with  another  as 
the  agent  of  a  third  person,  and  an  agreement  is  now  en- 
tered into  between  the  parties  in  which  no  representation 
is  made  that  the  party  is  acting  as  agent  although  the 
other  party  assumes  that  he  is  so  acting,  nevertheless  a 
contract  will  arise,  if  it  is  clear  that  the  person  who  was 
thought  to  be  acting  as  agent  did  not  know  of  the  delu- 
sion under  which  the  other  party  was  laboring  and  conse- 
quently did  not  purposely  mislead  him  (8). 

§  14.  When  a  knowledge  of  terms  of  offer  is  presumed. 
A  person  accepting  an  offer  is  charged  with  knowledge  of 
the  terms  of  the  offer,  and  can  not  set  up  his  ignorance  of 
them  if  reasonable  means  were  adopted  by  the  offeror  to 
bring  them  to  his  attention.  This  principle  is  illustrated 
by  the  case  of  Fonseca  v.  Cunard  Steamship  Company 
(9).  A  passenger  bought  a  ticket  which  contained  on  its 
face  terms  limiting  the  liability  of  the  carrier  for  the  bag- 
gage of  the  passenger.  It  appeared  that  the  passenger 
did  not  read  the  conditions,  yet  the  court  held  he  must  be 


(6)  Edmunds  v.  Merchants'  Despatch  Transportation  Co.,  135  Mass. 
283. 

(7)  Cundy  v.  Lindsay,  L.  R.  3  App.  Cas.  459. 

(8)  Stoddard  v.  Ham,  129  Mass.  383. 

(9)  153  Ma£s  553. 


12  CONTRACTS 

assumed  to  have  known  them  since  they  were  printed 
in  full  on  the  face  of  the  ticket,  and  he  could  not  set  up 
that  he  had  not  read  the  terms  of  what  amounted  to  an 
offer. 

§  15.  Actual  meeting  of  minds  not  required.  All  these 
cases  serve  to  show  that,  while  the  law  is  generally  stated 
in  the  form  that  there  must  be  an  actual  meeting  of  minds 
of  the  parties  to  make  a  contract,  the  term  is  not  to  be 
taken  in  its  strict  literal  sense.  Since  in  the  case  just 
stated  it  is  apparent  that  the  minds  of  the  parties  did  not 
actually  meet,  yet  as  the  offeror  had  made  his  offer  in 
definite  terms,  and  had  taken  reasonable  steps  to  bring 
them  to  the  attention  of  the  offeree,  the  law  presumes  that 
the  oft'eree  when  he  accepted  the  offer,  accepted  on  these 
terms. 

§  16.  Offer  must  be  communicated.  It  is  impossible 
for  a  person  to  assent  to  something  of  which  he  is  igno- 
rant, and  it  is  equally  impossible  for  a  person  to  accept  an 
offer  of  which  he  has  no  knowledge,  although  it  may  ap- 
pear that  he  has  done  the  very  act  for  the  doing  of  which 
the  offerer  promised  to  pay.  Yet  if  it  appears  that  he  was 
ignorant  of  the  offer  at  the  time  or  that  he  did  not  do  the 
act  with  the  intention  of  accepting  the  offer,  no  contract 
arises.  In  Fitch  v.  Snedaker  (10),  A  offered  a  reward  of 
$200  to  any  person  or  persons  giving  information  leading 
to  the  arrest  and  conviction  of  a  murderer.  B  gave  the 
information  leading  to  the  arrest  before  he  knew  of  the 
offer  of  a  reward,  and  it  was  held  that  he  could  not  re- 
cover since  it  appeared  that  he  had  not  acted  in  reliance 


(10)     38  N.  Y.  248. 


FORMATION  OF  CONTRACTS        13 

upon  the  offer.  The  same  rule  is  illustrated  by  numerous 
cases  growing  out  of  the  bounty  system  during  the  Civil 
War.  It  was  common  for  cities  and  counties  to  offer  a 
bounty  for  each  man  who  would  enlist  to  fill  the  quota  of 
a  particular  city  or  county  under  the  draft  acts.  The 
bounty  was  recovered  only  where  the  person  enlisted  with 
knowledge  that  a  bounty  was  offered  (11).  Acceptance 
of  the  offer  is  established  by  showing  that  the  act  was 
done  in  reliance  on  the  offer.  If  the  party  doing  the  act 
disclaims  any  intent  to  accept  the  offer,  by  so  doing  no 
contract  arises  (12). 

§  17.  Where  the  contract  arises.  It  is  important  to 
determine  where  the  contract  arises  since  the  construction 
of  its  terms  will  ordinarily  depend  upon  the  law  of  the 
state  where  the  contract  arose.  If  parties  are  dealing  face 
to  face  when  the  agreement  is  made  the  place  where  they 
are  at  the  time  will  be  the  place  of  contract.  If,  however, 
the  contract  is  made  by  letters  or  by  telegraph  or  tele- 
phone, a  different  situation  arises.  Suppose  for  example, 
A  in  New  York  writes  to  B  in  Chicago  offering  to  sell  cer- 
tain goods  at  certain  prices,  and  B  on  receipt  of  the  letter 
writes  a  letter  accepting  the  offer,  when  does  the  contract 
arise,  and  where  does  it  arise?  According  to  the  estab- 
lished rule  in  such  cases  the  contract  arises  as  soon  as  the 
letter  is  put  into  the  mail  in  Chicago,  properly  addressed 
and  stamped.  Accordingly  the  contract  is  completed  in 
Illinois  (13).    This  result  is  reached  by  assuming  that  A 


(11)  Mayor  of  Hoboken  v.  Bailey,  36  N.  J.  L.  R.  490. 

(12)  Hewitt  V.  Anderson,  56  Cal.  476. 

(13)  Dunlop  V.  Higgins,  1  H.  I*  Cas.  381. 


14  CONTRACTS 

by  mailing  his  letter  made  the  postoffice  department  hia 
agent  to  transmit  his  offer  and  receive  a  reply.  Accord- 
ingly when  B  mails  his  acceptance  in  Chicago  he  is  re- 
garded as  having  put  his  answer  into  the  hands  of  A's 
agent,  which  in  law  is  the  same  as  if  he  had  actually 
handed  it  to  A  in  person.  The  force  of  this  reasoning  is 
weakened  when  we  consider  another  class  of  cases  where 
the  person  making  the  offer  in  writing  says  to  the  offeree 
that,  if  the  latter  accepts,  he  will  do  some  act  to  indicate 
it,  as  by  placing  a  letter  under  a  stone.  If  the  offeree  does 
as  directed,  the  contract  arises  as  soon  as  the  act  is  com- 
pleted (14).  This  class  of  cases  indicates  that  the  agency 
theory  is  not  correct.  The  offeree  is  bound  when  he  does 
the  act  which  the  offeror  indicates  will  constitute  the  ac- 
ceptance of  the  offer. 

Applying  this  theory  when  an  offer  is  sent  to  one  at  a 
distance,  the  offeror  impliedly  authorizes  the  offeree  to 
use  the  ordinary"  means  of  communication,  and  if  the 
offeree  deposits  a  letter  or  sends  a  telegram  properly  ad- 
dressed, he  has  completed  the  act  which  the  offeror  recog- 
nizes as  an  acceptance  and  if  the  telegram  (15)  or  letter 
is  not  received,  the  risk  falls  on  the  offeror  and  not  on 
the  offeree.  In  the  case  of  contracts  made  by  telephone, 
the  same  rule  applies  as  in  the  case  of  letters  or  tele- 
grams, and  accordingly  the  contract  arises  as  soon  as  the 
offeree  has  spoken  the  words  into  the  transmitter  which 
constitute  an  acceptance  (16).    The  minds  of  the  parties 


(14)  Tayloe  v.  Merchants'  Fire  Ins.  Co.,  9  How.  390. 

(15)  Bank  of  Yolo  v.  Sperry  Flour  Co.,  141  Cal.  814. 

(16)  Trevor  v.  Wood,  36  N.  Y.  307. 


FORMATION  OF  CONTRACTS        15 

then  legally  meet  although  they  do  not  actually  meet 
when  the  offeree's  act  is  completed. 

§  18.  Acceptance  must  be  communicated.  The  accept- 
ance of  an  offer  must  be  communicated  to  the  offeror.  As 
just  indicated,  the  acceptance  is  communicated  in  point  of 
law  as  soon  as  the  offeree  has  done  the  act  indicated  by 
the  offeror  as  constituting  an  acceptance.  A  mere  deter- 
mination to  accept  an  offer  is  not  enough.  In  Felthouse  v. 
Bindley  (17),  A  offered  to  sell  a  horse  to  B.  There  was  a 
misunderstanding  as  to  the  price  and  B  wrote  to  A  saying 
that  he  would  split  the  difference.  A  determined  to  ac- 
cept but  did  not  communicate  his  intention  to  B.  The 
court  accordingly  heid  there  was  no  contract.  Thus,  if  a 
person  to  whom  an  offer  has  been  made  writes  a  letter  of 
acceptance  which  he  carries  in  his  pocket  or  leaves  on  his 
desk.  No  contract  arises.  He  must  do  the  overt  act  con- 
templated by  the  offeror,  and  put  his  acceptance  out  of 
his  possession  and  in  the  course  of  transmission  to  the 
offeror. 

§  19.  Mere  silence  not  an  acceptance.  Mere  silence  on 
the  part  of  the  offeree  will  not  constitute  an  acceptance 
ordinarily.  Thus  if  A  writes  to  B:  ''I  have  shipped  to 
you  certain  goods  at  certain  prices,  and  unless  I  hear 
from  you  shortly,  I  will  assume  you  have  accepted  them 
on  these  terms,"  B  is  not  bound  to  notify  A  that  he  will 
not  take  the  goods  and  he  can  not  be  compelled  to  accept 
them  or  pay  for  them.  Of  course,  if  he  does  take  and  use 
the  goods,  it  would  constitute  an  acceptance  of  the  offer, 


(17)     11  C.  B.  (N.  S.)  8691 


16  CONTRACTS 

and  would  render  him  liable  (IS).  There  are  exceptions 
to  the  above  rule  growing  out  of  prior  dealings  of  the 
parties.  Thus  in  Hobbs  v.  Massasoit  WTiip  Co.  (19),  A 
was  in  the  habit  of  shipping  eelskins  to  B,  a  manufacturer 
of  whips,  who  was  accustomed  to  accept  and  pay  for 
them.  In  this  particular  instance  B  refused  to  accept  the 
consignment  of  skins,  and  failed  to  notify  the  sliii»per,  and 
the  skins  were  spoiled  standing  in  the  cars.  B  was  hold 
liable  for  their  value  on  the  ground  that  the  previous 
course  of  dealing  between  the  parties  justified  A  in  send- 
ing the  goods  in  this  manner,  and  expecting  a  reply,  if 
they  were  not  accepted.  The  situation  in  this  case  is  ex- 
ceptional, however,  and  clear  evidence  is  always  required 
to  show  a  course  of  dealing  sufficient  to  justify  such  an  as- 
sumption on  the  part  of  the  offeror.  In  its  absence,  the 
general  rule  that  mere  silence  will  not  constitute  an  ac- 
ceptance must  prevail. 

§  20.  When  actual  receipt  of  acceptance  is  necessary. 
The  general  rule,  that  a  contract  made  by  mail  or  tele- 
graph arises  as  soon  as  the  acceptance  is  put  in  course  of 
transmission,  is  based  upon  usage  and  the  supposed  in- 
tent of  the  parties,  and  therefore  evidence  will  be  received 
to  show  that  in  a  particular  case  the  parties  intended  a 
different  rule  to  apply.  Thus  if  the  offeror  stipulates  that 
the  acceptance  must  be  received  by  him,  the  contract  will 
not  arise  when  the  letter  is  mailed,  but  only  when  it  has 
actually  been  received  as  stipulated.  Thus  A  wrote  to  B 
offering  to  lease  certain  premises  to  him  at  a  certain  stip- 


(18)  Bruce  v.  Pearson,  3  Johnson  (N.  Y.)  514 

(19)  158  Mass.  194. 


FORMATION  OF  CONTRACTS         17 

ulated  rental,  adding:  "If  I  do  not  hear  from  you  by  the 
loth,  I  shall  consider  the  offer  refused."  B  telegraphed 
an  acceptance  which  was  never  received.  It  was  held 
there  was  no  contract  since  the  offeror  clearly  stipulated 
for  the  actual  receipt  of  the  acceptance  (20).  If  the 
clause,  "unless  I  hear  from  you  by  the  15th'*  had  been 
omitted,  the  contract  would  have  arisen  although  the  tele- 
gram had  never  been  received  (21). 

Again  the  circumstances  under  which  the  offer  is  made 
may  show  that  an  actual  recei])t  of  the  acceptance  was  in- 
tended. In  the  case  of  Haas  v.  Myers  (22),  A  and  B  agreed 
to  purchase  a  herd  of  cattle  in  Montana  if  prices  were 
favorable.  B  was  to  go  to  Montana  to  inspect  the  herd 
and  it  was  agreed  that  if  satisfied  with  the  herd,  both  aa 
to  condition  and  prices,  he  was  to  wire  A,  "Yes;"  other- 
wise, "No."  If  "Yes,"  then  A  was  to  wire  the  price  nec- 
essarj'  for  a  one-third  interest,  which  amount  was  to  be 
deposited  in  a  bank  to  the  credit  of  B.  B  telegraphed  to 
A,  and  A  replied,  but  A's  telegram  was  never  received. 
It  was  held  that  inasmuch  as  B  was  to  do  certain  acts  on 
receipt  of  A's  telegram,  it  was  necessary  that  such  tele- 
gram be  actually  received  by  him,  and,  if  not  so  received, 
the  contract  did  not  arise. 

§  21.  Acceptance  must  be  responsive  to  the  offer.  The 
acceptance  of  an  offer  must  be  responsive  to  the  offer. 
Thus  if  A  writes  to  B,  "I  will  give  you  $500,  if  you  will 
agree  to  build  a  fence  around  my  property,"  and  B  re- 


(20)  Lewis  v.  Browning,  130  Mass.  173, 

(21)  Household  Ins.  Ck>,  v.  Grant,  L.  R.  4  Ex.  Div.  21C. 

(22)  111  111.  421. 


18  CONTRACTS 

plies,  *'I  accept,"  a  contract  is  made.  But  if  B  instead  of 
replying  starts  to  build  or  actually  builds  a  fence,  it  would 
not  be  an  acceptance  since  the  offer  calls  for  a  reply  and 
not  an  act.  If,  on  the  other  hand,  A  had  said,  **I  will  give 
you  $500  on  your  completing  a  fence  around  my  prop- 
erty," no  contract  would  arise  by  B's  writing  a  letter 
accepting  the  offer,  since  A  is  asking  not  for  a  promise, 
but  for  an  act,  i.  e.,  building  a  fence.  In  other  words, 
where  the  offer  contemplates  a  unilateral  contract,  the 
offeree  cannot  turn  it  into  a  bilateral  contract  by  giving 
a  promise  (23). 

§22.  Notice  of  acceptance:  Unilateral  contracts. 
Where  the  acceptance  of  an  offer  is  an  act,  notice  that  the 
act  has  been  done  is  not  necessary,  since  the  contract 
arises  as  soon  as  the  act  is  completed  (24).  Thus  in  the 
illustration  above  the  contract  would  arise  as  soon  as  the 
fence  was  built.  To  this  rule  there  are  some  apparent  ex- 
ceptions growing  out  of  commercial  usage.  Thus  where 
A  says  to  B,  "If  you  will  sell  certain  goods  to  C,  I  will 
guarantee  that  he  will  pay  for  them,"  this  offer  would  be 
accepted  by  selling  the  goods  to  C  in  reliance  on  the  guar- 
anty, but  the  law  requires  further  that  B  notify  A  that  he 
has  acted  on  the  offer.  The  giving  of  the  notice  is  not  as 
acceptance  of  the  offer,  however,  but  it  is  an  additional 
act  which  the  law  requires  in  deference  to  commercial 
usage.  If  A  is  to  be  responsible  for  C's  debt  to  B,  he 
should  be  notified  that  the  debt  has  been  incurred  in  re- 
liance on  his  promise  in  order  that  he  may  protect  him- 


(23)  White  v.  Corlies  et  al.,  46  N.  Y.  467. 

(24)  First  National  Bank  v.  Watkins,  154  Mass.  385. 


FORMATION  OF  CONTRACTS  19 

self.  Hence,  if  knowledge  comes  to  him  from  any  other 
trustworthy  source  that  goods  have  been  sold  in  reliance 
on  his  credit,  he  will  be  liable  (25).  There  are  some  au- 
thorities contrary  in  reasoning  to  this  view.  If  not  to  the 
result  reached  (26).  In  these  cases  the  court  seems  to 
take  the  view  that  no  contract  arises  until  the  notice  is 
sent.  This  view  is  contrary  to  the  accepted  rule  in  uni- 
lateral contracts. 

§  23.    By  whom  offer  must  be  accepted.    Where  an 
offer  is  made  to  a  specific  person,  that  person  alone  can 
accept.     Thus,  where  A  sent  an  order  to  B  for  goods, 
which  order  was  filled  by  C  who  had  bought  out  B  's  busi- 
ness unknown  to  A,  it  was  held  that  no  contract  had  been 
made  since  the  offer  was  not  made  to  C  but  to  B  (27).    If 
the  offer  is  made  to  the  public  generally,  then  any  member 
of  the  public  who  complies  with  the  terms  of  the  offer  be- 
comes a  party  to  the  contract.    The  most  common  illustra- 
tion of  this  sort  of  an  agreement  is  an  offer  for  a  reward. 
A  advertises  in  the  newspaper  or  by  posted  notice  that  he 
will  pay  a  reward  to  any  one  furnishing  information  lead- 
ing to  the  recovery  of  a  lost  article.    Any  member  of  the 
public  furnishing  information  or  returning  the  article  can 
recover  the  reward  if  he  furnishes  the  information  or  re- 
turns the  article  with  knowledge  of,  and  in  reliance  upon 
the  offer  (28). 
§24.    Certainty  of  terms:    Advertisements  as  offers. 


(25)  Bishop  V.  Eaton,  161  Mass.  496. 

(26)  Davis  Sewing  Machine  Co.  v.  Richards,  115  U.  S.  524. 

(27)  Boulton  v.  Jones,  2  H.  &  N.  564;  Boston  Ice  Co.  v.  Potter,  123 
Mass.  28. 

(28)  Anson,  Contracts  (HufiEcut's  2  ed.)  54. 


20  CONTRACTS 

Not  all  proposals  made  in  the  form  of  offers  are  to  be  so 
regarded.  Their  meaning  depends  on  the  circumstances 
under  which  and  the  purpose  for  which  they  are  made, 
and  also  the  general  understanding  of  business  custom. 
Ordinary  advertising  matter  furnishes  the  common  illus- 
tration. A  merchant  adv^ertises  his  wares  in  a  newspaper 
setting  out  the  articles  to  be  sold  and  the  prices.  The 
advertisement  will  not  be  construed  as  a  specific  offer, 
but  merely  as  an  attempt  to  call  attention  to  the  wares  of 
the  merchant  and  to  show  the  bargains  he  is  offering,  but 
he  is  not  bound  to  sell  the  articles  thus  advertised  to  ap- 
plicants although  they  tender  the  price.  Circular  letters 
sent  out  to  the  trade  by  a  wholesale  merchant  fall  within 
the  same  rule.  In  Moulton  v.  Kershaw  (29),  A,  a  salt 
dealer,  sent  a  circular  letter  to  B,  a  retail  merchant,  as 
follows:  *'In  conseciuence  of  a  rupture  in  the  salt  trade 
we  are  authorized  to  offer  you  Michigan  fine  salt  in  full 
car  load  lots  delivered  at  8  cents.  This  is  a  bargain.  Will 
be  pleased  to  have  your  order."  B  telegraphed  for  200 
barrels,  which  A  refused  to  deliver.  In  a  suit  on  the  al- 
leged contract,  the  court  held  that  no  contract  was  made 
since  the  letter  to  A  was  merely  a  circular  advertising  his 
wares,  and  not  intended  as  an  offer. 

§  25.  When  advertisement  is  an  offer.  It  must  not  be 
presumed  from  the  above  case  that  it  is  impossible  to 
make  an  offer  by  advertisement  or  circulars.  It  is  pos- 
sible, provided  it  is  clear  that  the  author  intends  the  cir- 
cular or  advertisement  to  be  an  offer.  Thus  in  Carlill  v. 
Carbolic  Smoke  Ball  Co.  (30),  the  company  advertised 


(29)  59  Wis.  316. 

(30)  L.  R.  1  Q.   B.    (1893)   256. 


FORMATION  OF  CONTRACTS  21 

that  they  would  pay  £100  reward  to  any  one  who  used 
their  smoke  ball  for  three  times  daily  for  two  weeks,  and 
contracted  the  prevailing  influenza.  A  purchased  a  ball 
and  used  it  as  directed  for  that  period,  contracted  influ- 
enza, and  then  brought  an  action  to  recover  the  reward. 
It  was  held  a  valid  contract.  The  court  distinguished  the 
case  from  the  ordinary  advertisement  by  saying  that  the 
Smoke  Ball  Company  evidently  intended  it  to  be  an  offer 
because  they  expressly  stated  that  they  had  deposited 
£100  in  a  certain  bank  as  evidence  of  their  sincerity  in  the 
matter,  which  statement  would  justify  the  belief  on  the 
part  of  the  plaintiff  that  this  was  not  an  ordinary  adver- 
tisement. 

§  26.    Clear  evidence  of  intent  to  make  an  offer  is  re- 
quired.   The  law  requires  that  it  be  very  clearly  shown 
that  the  party  intended  to  make  an  offer  in  a  particular 
case.    Where  an  inquiry  is  addressed  to  the  owner  of 
property  as  to  whether  he  will  sell  the  property  and  at 
what  price,  the  reply  of  the  owner,  stating  the  price,  is 
not  to  be  regarded  as  an  offer  which  will  ripen  into  a  con- 
tract if  accepted  by  the  other  party.    Thus  in  the  case  of 
Harvey  v.  Facey  (31),  A  telegraphed  to  B:    ^'Will  you 
sell  Bumper  Hall  pen?    Telegraph  lowest  cash  price. "    B 
replied:    '' Lowest  price  for  Bumper  Hall  pen  £900."    A 
immediately  telegraphed  accepting  the  alleged  offer.    The 
court  held  that  no  contract  was  made  here  since  B's  tele- 
gram was  not  an  offer.    So  also  a  statement  made  in  the 
form  of  the  offer  may  be  made  under  such  circumstances 
as  to  indicate  no  offer  was  intended.    Thus  in  the  case  of 

(31)     L.  R.  App.  Cas.  (1893)  552. 


22  CONTRACTS 

Stamper  v.  Temple  (32),  A,  who  had  just  been  wounded 
and  his  son  killed  in  a  shooting  affray,  exclaimed,  *'I  will 
give  $200  for  the  arrest  of  our  assailants. ' '  B  afterwards 
assisted  in  the  arrest  of  the  assailant  and  sued  for  the  re- 
covery of  the  reward.  It  was  held  that  A's  statement  did 
not  constitute  an  offer  in  the  light  of  the  circumstances, 
since  he  was  laboring  under  great  excitement,  his  son  had 
just  been  killed  and  he  himself  had  been  seriously 
wounded,  and  his  statement  must  be  regarded  as  a  mere 
exclamation. 

§  27.  Binding  force  of  agreement  preliminary  to  formal 
contract.  Where  the  parties  have  made  a  preliminary 
agreement  with  the  intention  that  a  formal  contract  shall 
be  drawn  up,  either  party  may  retire  before  the  formal 
agreement  is  executed,  without  liability,  if  it  appears  that 
all  the  terms  of  the  proposed  contract  have  not  been 
agreed  upon.  It  would  be  unjust  to  enforce  this  incom- 
plete agreement,  which  does  not  represent  the  final  deci- 
sion of  the  parties,  and  which  may  come  to  naught 
through  failure  of  subsequent  negotiations.  Thus  in  the 
case  of  Page  v.  Norfolk  (33),  A  offered  $145,000  to  B  for 
the  latter 's  brewing  business,  subject  to  detailed  con- 
tract, payment  to  be  $95,000  in  cash,  balance  stock  in  a 
company  to  be  organized  to  operate  the  property.  B 
wrote  accepting  the  offer  but  afterwards  refused  to  pro- 
ceed. It  was  held  no  contract  was  made,  since  the  essen- 
tial terms  as  to  the  formation  of  the  company,  value  of 
stock,  capital  of  the  company,  etc.,  were  still  uncertain. 


(32)  6  Humph.  (Tenn.)  113. 

(33)  70  L.  T.  R.  (N.  S.)  781. 


FORMATION  OF  CONTRACTS  23 

If,  however,  it  appears  that  the  parties  have  agreed  upon 
all  the  essential  terms  of  the  contract,  and  nothing  re- 
mains to  be  done  except  to  embody  those  terms  in  a 
formal  contract,  the  general  rule  is  that  the  party  can  not 
withdraw  (34).  Even  where  the  contract  is  evidently  in- 
complete, if  the  parties  proceed  to  treat  it  as  binding,  and 
perform  under  it,  they  will  be  held  to  the  bargain  which 
results  from  their  acts,  rather  than  their  words  (35). 

§  28.  Acceptance  must  be  in  the  terms  of  the  offer. 
The  acceptance  of  an  offer  must  be  in  the  terms  of  the 
offer  or  it  will  operate  as  a  rejection  of  it.  The  offeror 
has  the  right  to  make  an  offer  in  any  terms  he  sees  fit,  and 
the  offeree,  if  he  desires  to  enter  into  a  contract  with  him 
is  bound  to  accept  in  these  terms.  Thus  if  A  writes  to  B 
offering  to  sell  B  certain  land  and  B  replies  accepting  the 
offer,  enclosing  conditions  of  sale  as  to  time  and  place  of 
delivery  of  the  deed,  this  will  operate  as  a  rejection  of  the 
offer.  When  the  offer  is  silent  as  to  place  of  delivery  of 
the  deed  and  payment  of  purchase  price,  the  law  requires 
payment  at  the  residence  of  the  vendor,  and  any  change 
in  the  place  of  delivery  made  in  the  acceptance  by  the 
offeree  is  the  introduction  of  a  new  term  and  rejects  the 
offer  (36).  If,  however,  the  offeree  merely  suggests  a 
place  of  delivery  and  it  is  clear  from  his  language  that  he 
intends  it  merely  as  a  suggestion  and  not  as  a  condition 
of  his  acceptance,  the  contract  will  stand  (37).  When  the 
acceptor  embodies  in  his  acceptance  terms  which  the  law 


(34)  Shepard  v.  Carpenter,  54  Minn.  153. 

(35)  Cases  above.    Clark,  Contracts,  62. 

(36)  Baker  v.  Holt,  56  Wis.  100. 

(37)  Matteson  v.  Scofield,  27  Wis.  671. 


24  CONTRACTS 

will  imply  anyway,  the  acceptance  is  not  conditional  and 
will  stand.  To  refer  to  the  illustration  above,  if  an  offer 
is  made  for  the  purchase  and  sale  of  land  by  A  residing  in 
X  and  B  residing  in  Y,  and  B  replies  suggesting  that  the 
deed  be  delivered  at  X,  the  residence  of  A,  and  the  pur- 
chase money  paid  there,  he  is  simply  stating  in  terms 
what  the  law  would  imply,  and  therefore  is  not  adding 
any  new  terms  to  the  agreement. 

§  29.  Effect  of  counter  offer.  If  the  offeree  embodies 
terms  in  his  acceptance  which  are  not  in  the  offer,  he  not 
only  rejects  the  original  otTer,  but  in  turn  makes  an  offer 
to  the  other  party  which  he  in  turn  may  accept  or  reject. 
It  would  seem  that  the  offeree  must  consider  the  offer  as 
made.  He  can  not  withhold  action  on  the  offer,  and  make 
an  offer  himself  relative  to  the  same  subject  matter  with- 
out rejecting  the  original  offer.  Thus  if  A  says  to  B,  "I 
will  sell  you  my  cow  for  $100,"  and  B  replies,  "I  will 
consider  your  offer,  but  I  now  offer  you  $75  for  the  cow," 
obviously  this  would  operate  as  a  rejection  of  the  original 
offer,  since  the  oft'eror  has  a  right  to  insist  upon  the  con- 
sideration of  his  offer  prior  to  any  further  dealing  with 
the  same  subject  matter  (38). 

§  30.  Revocation  of  the  offer.  An  offer  may  be  with- 
drawn at  any  time  prior  to  its  acceptance.  A  revocation 
to  be  effective  must  be  actually  communicated  to  the 
offeree.  A  mere  decision  on  the  part  of  the  offeror  to  re- 
voke, or  even  a  letter  or  telegram  of  revocation,  duly 
posted,  will  not  be  effective  until  received,  and  if  the 


(38)     Minneapolis  &  St.  Louis  Ry.  v.  Columbus  Rolling  Mill  Co., 
119  U.  S.  149. 


FORMATION  OF  CONTRACTS         25 

offeree  accepts  the  offer  by  duly  posted  letter  or  telegram, 
or  by  doing  any  other  act  which  the  offeror  designates  as 
an  acceptance,  a  contract  will  arise  even  though  the  revo- 
cation is  received  by  the  offeree  before  the  offeror  has  re- 
ceived the  acceptance.  Thus,  in  the  case  of  Byrne  &  Co. 
V.  Van  Tienhoven  (39),  on  October  1st  A  offered  to  sell 
B  a  quantity  of  tinplate.  On  the  8th  of  October  A  wrote 
to  B  revoking  the  offer.  On  the  15th  of  October  B  cabled 
an  acceptance.  It  was  held  that  a  contract  arose  the  mo- 
ment the  cablegram  was  filed  for  transmission,  although 
the  letter  of  revocation  had  been  mailed  a  number  of  days 
before,  yet  as  it  had  not  yet  come  to  the  attention  of  B,  it 
was  ineffective  as  a  revocation.  A  revocation  may  be 
made  either  in  terms  or  by  conduct  which  renders  per- 
formance impossible.  Thus,  if  A  has  made  an  offer  to  sell 
land  to  B,  a  sale  of  the  land  to  X  will  constitute  a  revoca- 
tion if  brought  to  the  notice  of  the  offeree  prior  to  ac- 
ceptance by  him. 

§  31.  Revocation  where  offer  is  to  remain  open  for  a 
definite  time.  Even  where  the  offeror  expressly  states 
that  the  offer  will  remain  open  for  a  definite  time,  never- 
theless he  is  at  liberty  to  withdraw  it  at  any  time  prior  to 
acceptance.  Thus  in  Offord  v.  Davis  (40),  A  offered  to 
guarantee  all  the  bills  of  D  &  C  which  should  be  dis- 
counted by  B,  within  a  year.  Before  any  bills  were  dis- 
counted, A  notified  B  that  he  withdrew  his  offer.  A  sub- 
sequent discounting  of  D  &  C*s  paper  by  B  imposed  no 
liability  on  A,  since  the  offer  was  withdrawn  before  ac- 
ceptance. 


(39)  L.  R.  5  C.  p.  D.  344. 

(40)  12  C.   B.    (N.   S.)    748. 


26  CONTRACTS 

§  32.  Options.  Tlie  only  effect  of  a  promise  to  keep 
the  offer  open  is  to  determine  how  long  the  offer  will  re- 
main open  if  not  previously  revoked.  If,  however,  the 
offeree  gives  something  of  value  for  the  promise  to  keep 
the  offer  open,  a  contract  arises,  and  a  revocation  of  the 
offer  will  constitute  a  breach,  rendering  the  offeror  liable 
in  damages.  Agreements  of  this  character  are  known  as 
options. 

§  33.  Revocation  of  offers  to  public,  ^\^lere  the  offer 
is  made  to  the  public  generally,  as  in  the  case  of  rewards, 
it  would  be  impossible  to  give  personal  notice  of  with- 
drawal to  ever\"  one  who  had  knowledge  of  the  offer.  Ac- 
cordingly, it  has  been  held  that  such  an  offer  may  be 
withdrawn  in  the  same  public  way  in  which  it  is  made. 
Thus,  in  Shuey  v.  United  States  (41),  it  was  held  that 
offers  of  reward  made  by  the  United  States  government 
for  the  apprehension  of  the  assassins  of  President  Lin- 
coln could  be  withdrawn  by  publication  in  the  same  man- 
ner that  the  original  offer  was  made,  and  consequently  a 
person  who  performed  an  action  in  reliance  upon  the 
offer  after  such  publication  could  not  recover. 

§  34.  When  revocation  is  communicated.  It  is  not  es- 
sential, apparently,  that  the  offeree  know  of  the  revoca- 
tion from  the  offeror  directly.  If  he  receives  information 
through  a  reliable  source  that  the  offer  has  been  re- 
voked, the  offer  is  regarded  as  revoked.  Thus  in  the  case 
of  Dickinson  v.  Dodds  (42),  A  offered  to  sell  land  to  B, 
the  offer  to  remain  open  until  Friday.    On  Thursday  B 


(41)  92  u.  s.  73. 

(42)  L.  R.  2  Ch.  Div.  463. 


FORMATION  OF  CONTRACTS         27 

learned  through  X  that  A  had  sold  the  land.  B  at  once 
left  a  letter  at  A's  residence  accepting  the  offer  and  the 
next  day,  Friday,  accepted  in  person.  It  was  held  that  no 
contract  arose  since  the  offer  was  revoked  prior  to  its  ac- 
ceptance. This  rule,  however,  must  not  be  stated  too 
broadly  since  the  offeree  is  not  bound  to  regard  mere 
rumor.  It  must  in  every  case  appear  that  the  information 
came  so  directly  as  to  make  its  truth  reasonably  certain. 
The  soundness  of  a  rule  that  recognizes  anything  short  of 
direct  notice  of  revocation  by  the  offeror  to  the  offeree 
has  been  questioned  (43). 

§  35.  Termination  by  lapse  of  time.  Where  an  offer  is 
not  limited  in  terms  to  a  fixed  time,  it  will  not  continue 
indefinitely.  In  such  cases  the  offer  is  said  to  lapse  on 
the  expiration  of  a  reasonable  time.  What  is  a  reasonable 
time  is  a  question  dependent  on  the  facts  of  each  case. 
The  court  will  take  into  consideration  the  occasion  of  the 
offer,  the  subject  matter,  and  the  language  used  by  the 
parties  in  determining  this  question.  Thus  in  Loring  v. 
Boston  (44),  the  city  of  Boston  offered  a  reward  in  1837 
for  the  conviction  of  persons  guilty  of  setting  incendiary 
fires.  A  caused  the  arrest  of  a  person  who  had  set  an  in- 
cendiary fire  in  1841  and  claimed  the  reward.  It  was  ob- 
jected that  the  offer  of  reward  must  be  regarded  as  with- 
drawn since  it  appeared  that  at  the  time  of  the  offer  in 
1837  there  had  been  a  number  of  incendiary  fires  in  the 
city  and  the  reward  was  offered  in  the  face  of  the  dangers 
threatened  and  was  intended  to  secure  the  conviction  of 


(43)  Wald'8  Pollock  on  Contracts  (Williston's  ed.)  32. 

(44)  7  Met.  409. 


28  CONTRACTS 

the  perpetrator  of  the  fires  of  that  period.  The  court 
adopted  this  view  and  held  that  the  offer  had  lapsed.  A 
different  result  was  intimated  where  there  is  a  standing 
ordinance  offering  rewards  for  incendiaries. 

§  36.  Period  of  offer  determined  by  the  subject  matter. 
The  period  of  the  offer  is  also  detcruiined  by  the  sub- 
ject matter  of  the  contract.  Thus  in  the  case  of  Minne- 
sota Linseed  Oil  Co.  v.  Collier  White  Lead  Co.  (45),  an 
offer  to  sell  linseed  oil  was  made  by  A  in  Minneapolis  to 
B  in  St.  Louis.  The  offer  was  by  wire  and  sent  at  9:15 
o'clock  p.  m.,  Saturday,  July  31st.  It  was  delivered  to  B 
between  eight  and  nine  o'clock  on  Monday,  August  2nd. 
On  Tuesday,  August  3rd,  at  8:53  o'clock  a.  m.,  B  wired  an 
acceptance.  It  was  held  that  the  offer  was  revoked  by 
lapse  of  time.  In  reaching  this  conclusion  the  court  con- 
sidered the  fact  that  the  subject  matter  of  the  contract 
was  an  article  which  at  that  time  was  fluctuating  rapidly 
in  value  and  therefore  twenty-four  hours'  delay  after  the 
receipt  of  the  despatch  was  an  unreasonable  delay.  The 
fact  also  that  the  offer  is  sent  by  telegraph  tended  to  in- 
dicate the  urgent  character  of  the  transaction  and  make 
the  period  during  which  the  offer  was  presumed  to  stand 
relatively  short.  An  acceptance  by  less  speedy  means  of 
communication  would  also  be  regarded  as  an  unreason- 
able delay.  Thus  where  an  offer  is  sent  by  wire  an  ac- 
ceptance by  mail  would  not  comply  with  the  implied 
terms  of  the  offer. 

Where,  however,  the  subject  matter  of  the  article  of 
sale,  such  as  land,  does  not  fluctuate  in  value  and  there  is 


(45)     4  Dill.  431. 


FORMATION  OF  CONTRACTS         29 

nothing  in  the  language  of  the  parties  or  the  circum- 
stances under  which  the  offer  is  made  to  indicate  that  the 
transaction  is  urgent,  a  considerable  period  of  time  may- 
elapse  without  raising  the  implication  that  the  offer  has 
been  withdrawn.  Thus,  in  Ramgate  Victoria  Hotel  Co.  v. 
Montefiore  (46),  A  applied  for  an  allotment  of  shares  in 
the  company  on  June  8th,  and  the  allotment  was  made  on 
November  23rd.  The  court  held  that  the  allotment  which 
constituted  an  acceptance  of  the  offer  was  too  late,  but 
also  indicated  that  a  mere  matter  of  a  month  or  two 
would  not  have  been  an  unreasonable  delay  in  accepting 
the  offer. 

§  37.  Answer  by  return  mail.  Frequently  the  offer 
stipulates  for  an  answer  by  return  mail.  Such  stipulation 
is  usually  considered  not  to  mean  the  first  mail  that  goes 
out  after  the  offer  is  received.  A  letter  posted  on  the  day 
the  offer  is  received  complies  with  this  rule.  Thus  in 
Dunlop  V.  Higgins  (47),  the  offer  was  received  about 
noon,  stipulating  reply  by  return  mail.  The  first  post  left 
at  two  o'clock  in  the  afternoon,  and  another  post  left  at 
six  o'clock.  It  was  held  that  a  letter  posted  in  time  for 
the  six  o'clock  post  was  in  compliance  with  the  terms  of 
the  offer.  It  may  well  appear  in  certain  cases  that  the 
term  *'by  return  mail"  is  used  in  a  mere  formal  way  and 
is  not  intended  to  be  literally  complied  with. 

§  38.  Effect  of  death.  It  would  seem  to  follow  from 
the  rules  previously  laid  down  as  to  the  prerequisites  of 
legal  agreements  that  the  death  of  the  offeror  before  the 


(46)  L.  R.  1  Ex.  109. 

(47)  1  H.  L.  Cas.  381. 


30  CONTRACTS 

offer  is  accepted  would  revoke  the  offer,  and  such  is  the 
rule.    The  offer  is  said  to  be  terminated  by  operation  of 
law  and  no  notice  to  the  offeree  is  essential  as  in  the  or- 
dinary case  of  revocation.    Tims  in  the  case  of  Jordan  v. 
Dobbins  (48),  where  A  offered  to  guarantee  the  payment 
of  all  goods  sold  by  B  to  C  for  a  year,  it  was  held  that  the 
offer  was  terminated  by  the  death  of  A,  and  B  could  not 
hold  X,  who  was  the  executor  of  A's  will,  for  bills  in- 
curred after  A's  death,  although  B  extended  the  credit  in 
ignorance  of  the  death  and  in  reliance  on  the  offer.  Cases 
of  this  character  seem  to  be  in  conflict  with  the  rule  pre- 
viously stated  that  a  revocation  is  not  effective  unless 
actually  brought  to  the  attention  of  the  offeree.    By  some 
courts  the  ruling  is  justified  on  the  grounds  that  death  is 
public  in  its  nature,  and  all  persons  are  charged  with  no- 
tice of  it,  and  accordingly  the  offeree  when  he  accepts  an 
offer  after  the  offeror's  death  is  presumed  to  know  of  the 
death.     This  explanation  is  hardly  consistent  with  the 
facts,  however.    The  rule  is  based  on  the  theory  that  an 
offer  cannot  exist  without  personality  behind  it  and  when 
the  personality  disappears  the  offer  must  of  necessity  dis- 
appear.   There  seems  to  be  no  pressing  commercial  neces- 
sity which  would  justify  the  court  in  applying  any  other 
rule.     The  converse  case  is  also  true,  namely,  that  the 
death  of  the  offeree  terminates  the  offer.    Since  the  offer 
was  made  to  this  specific  person  and  not  to  the  public,  the 
death  of  this  specific  person  operates  to  destroy  the  offer. 
§  39.    Effect  of  insanity.    The  same  rule  generally  pre- 
vails in  the  case  of  insanity  of  the  offeror.    Thus,  in  the 


(48)     122  Mass.  168. 


FORMATION  OF  CONTRMJTS  31 

case  of  Beech  v.  M.  E.  Cliurch  (49),  the  defendant's  testa- 
tor had  subscribed  to  the  fund  for  the  erection  of  a 
church.  Shortly  after  the  subscription  was  made  and  be- 
fore it  was  accepted  by  the  church,  the  testator  became 
insane  and  so  continued  up  to  the  time  of  his  death.  It 
was  held  that  insanity  operated  as  a  revocation  of  the 
offer  on  the  same  ground  as  in  the  case  of  the  death  of  the 
party.  The  courts  are  not  unanimous  on  this  proposi- 
tion, however,  and  the  English  courts  hold  that  if  the 
offeree  accepts  the  offer  while  ignorant  of  the  insanity  of 
the  offeror  the  contract  would  be  enforced  (50). 

In  the  United  States  the  majority  of  the  courts  hold 
that  if  the  offer  has  been  accepted  and  performance  has 
been  completed  to  the  point  where  the  parties  can  not  be 
put  back  in  their  original  position,  assuming  that  the  par- 
ties have  acted  in  good  faith  ignorant  of  the  insanity,  the 
contract  will  stand  (51).  This  view  of  the  American 
courts  is  not  to  be  supported  on  principle— either  the  con- 
tract should  be  considered  good  or  bad.  Assuming  that 
the  parties  have  acted  in  good  faith,  the  enforceability  of 
the  contract  should  not  depend  on  facts  subsequent  to  the 
making  of  the  agreement. 


(49)  96  111.  177. 

(50)  Imperial  Loan  Co.  v.  Stone,  L.  R.  1  Q.  B.     (1892)  599. 

(51)  Anson,  Contracts   (HufEcut's  2  ed.),  154,  note. 


CHAPTER  III. 

CONSIDERATION. 

§  40.  Consideration.  Although  the  minds  of  the  par- 
ties may  have  met  with  reference  to  a  common  purpose, 
still  the  agreement  will  not  be  a  legal  contract  unless  it 
successfully  meets  another  test  which  the  law  imposes. 
The  law  requires  that  every  enforceable  promise,  except 
promises  under  seal  (which  will  be  dealt  with  hereafter), 
should  be  supported  by  a  consideration.  This  doctrine  is 
universally  accepted  at  common  law,  and  in  the  case  of 
Rann  v.  Hughes  (1),  the  House  of  Lords,  the  highest 
court  of  appeal  in  England,  laid  down  the  rule  that  all 
contracts,  whether  oral  or  in  writing,  must  be  supported 
by  a  consideration  unless  under  seal.  By  consideration  is 
meant  something  of  value  received  or  given  at  the  request 
of  the  promisor  in  reliance  upon  and  in  return  for  his 
promise.  The  option  contracts  referred  to  will  serve  as 
an  illustration  of  the  application  of  this  rule.  Thus,  if  A 
offers  to  sell  B  a  piece  of  land  for  a  fixed  sum  of  money, 
and  B  asks  for  time  to  consider  the  offer,  and  A  promises 
he  may  have  it,  nevertheless  A  may  dispose  of  the  land 
to  others,  since  his  promise  to  B  is  a  mere  naked  promise 
unsupported  by  any  consideration.  If,  however,  B  pays 
a  sum  of  money  to  A  in  return  for  his  promise  to  keep  the 
offer  open  for  a  fixed  period,  a  contract  arises  which  is 

(1)     7  Term  Repts.  350. 

32 


FORMATION  OF  CONTRACTS         33 

supported  by  a  consideration  and  A  cannot  then  after- 
wards withdraw  his  offer.  The  money  paid  by  B  is 
known  in  law  as  a  consideration. 

§  41.  Origin  of  doctrine.  This  doctrine  of  considera- 
tion is  peculiar  to  the  common  law  and  is  unknown  in  the 
same  form  in  any  other  system  of  law.  Its  precise  origin 
is  surrounded  in  considerable  mystery  and  not  until  a 
rather  late  period  was  it  accepted  as  a  general  rule. 
Thus,  as  late  as  1765,  in  the  case  of  Pillans  v.  Van  Mierop 
(2),  Lord  Mansfield  seemed  to  think  that  a  consideration 
was  required  merely  as  a  matter  of  evidence,  and  if, 
therefore,  the  contract  was  in  writing  or  was  established 
in  some  other  recognized  manner  no  consideration  would 
be  required.  This  doctrine  has,  however,  been  com- 
pletely abandoned. 

As  a  result  of  the  investigation  of  legal  scholars  (3), 
the  generally  accepted  view  is  that  the  doctrine  of  con- 
sideration had  its  origin  in  procedure.  As  commonly 
stated  by  text-writers  a  consideration  may  be  either  a 
benefit  to  the  promisor  or  a  detriment  to  the  promisee 
and  this  alternative  form  of  statement  serves  to  indicate 
the  probable  twofold  origin  of  the  doctrine  itself.  In  the 
common  law  action  of  debt,  it  was  assumed  that  the 
debtor  had  money  or  chattels  belonging  to  the  creditor, 
either  because  he  had  received  so  much  money  from  the 
creditor  or  something  which  was  admittedly  equivalent 
to  the  money.  In  the  case  of  a  sale  of  goods,  the  buyer 
acquired  property  in  the  goods  and  the  seller  acquired 


(2)  3  Burr.  1663. 

(3)  Holmes  Common  Law,  247;  Ames'  History  of  Assumpsit,  2  Har. 
L.  Rev.  1,  53;   Hare  oa  Contracts,  117. 


34  CONTRACTS 

property  in  the  agreed  price.  The  action  was,  therefore, 
to  recover  this  property  and  not  a  suit  on  a  promise.  In 
order  to  succeed  it  was  necessary  to  show  that  the  debtor 
had  received  an  equivalent  or  recompense — known  by  the 
term  quid  pro  quo.  From  this  necessity  comes  the  state- 
ment that  a  consideration  is  a  benefit  to  the  promisor. 

On  the  other  hand,  in  the  action  on  the  case  in  assump- 
sit, it  was  immaterial  whether  the  promisor  received  a 
benefit  or  not  as  a  result  of  his  undertaking.  If  the  prom- 
isor had  assumed  an  active  duty  towards  the  promisee 
either  by  promise  or  otherwise,  and  the  promisee  had  in- 
curred risk  or  trouble  or  expense  in  reliance  on  the  as- 
sumption, the  promisor  was  liable.  The  promise  was  or- 
iginally immaterial.  The  important  thing  was  the  as- 
sumption of  a  duty  by  the  promisor  and  the  detriment 
suffered  by  the  promisee  in  reliance  thereon.  Hence,  the 
second  form  of  the  definition  that  a  detriment  to  the 
promisee  is  a  consideration. 

Although  the  old  form  of  statement  is  still  adhered  to 
by  the  text-writers,  nevertheless,  it  is  quite  clear  from  an 
examination  of  the  authorities  that  the  rule  may  be  stated 
in  this  form:  A  consideration  must  he  a  detriment  to  the 
promisee.  AVhether  or  not  the  promisor  has  derived  any 
benefit  from  the  act  of  the  promisee  is  immaterial,  but 
if  it  appears  that  the  promisee  has  given  up  something  of 
value  in  reliance  on  the  offer,  he  can  succeed  in  his  action, 
to  establish  a  contract ;  otherwise,  not. 

§  42.  Motive  and  consideration.  A  distinction  must  be 
drawn  between  motive  and  consideration.  There  may  be 
a  great  variety  of  reasons  which  induce  parties  to  enter 


FORMATION  OF  CONTRACTS  35 

into  an  agreement.  Those  reasons  ordinarily  would  have 
no  bearing  on  the  validity  of  the  agreement  itself.  The 
consideration  for  a  contract  differs  from  the  motive  in 
that  the  latter  is  the  cause  for  entering  into  the  agree- 
ment, whereas  a  consideration  is  the  thing  given  by  the 
promisee  in  reliance  on  the  promise.  This  distinction  is 
illustrated  by  the  case  of  Thomas  v.  Thomas  (4),  in 
which  A's  husband,  desiring  that  further  provision  be 
made  for  A,  on  his  death  bed  requested  B,  who  was  the 
executor  of  his  estate,  to  make  conveyance  to  A  of  the 
use  of  a  certain  dwelling  house.  In  furtherance  of  this 
request  B  agreed  that  A  should  have  the  house  and  A 
promised  to  pay  £1  per  year  rent.  B  refused  to  carry 
out  the  agreement  and  plaintiff  brought  the  action  for 
breach  of  contract  and  recovered,  the  court  holding  that 
while  the  motive  back  of  the  entire  transaction  was  to 
carry  out  the  last  wish  of  the  husband,  yet  that  would 
not  sustain  the  undertaking,  but  the  £1  a  year  which  A 
was  to  pay  was  a  sufficient  consideration  to  support  the 
promise.  And  again,  in  the  case  of  Philpot  v.  Gruninger 
(5),  A  and  B  were  indebted  to  C.  C  subsequently  agreed 
to  become  a  member  of  a  syndicate  formed  by  A,  B,  and 
others  for  the  promotion  of  certain  oil  wells,  and  to  trans- 
fer certain  property  to  the  syndicate,  which  transaction 
he  never  carried  out.  On  the  same  day,  A,  B,  and  D  gave 
C  their  note  covering  the  original  debt  to  C.  C  brought 
suit  on  the  note  and  the  defendants  set  up  that  there  was 
no  consideration  for  the  note  on  the  ground  that  C  had 


(4)  2  Q.  B.  851. 

(5)  14  Wall.  570. 


36  CONTRACTS 

not  carried  out  his  promise  with  respect  to  the  syndicate. 
All  this  was  rejected,  however,  the  court  holding  that  the 
consideration  consisted  in  the  settlement  of  the  old  claim 
held  against  A  and  B,  and  while  the  motive  which  actu- 
ated A,  B,  and  D  in  giving  the  note  may  have  been  to 
induce  C  to  enter  into  the  syndicate,  yet  it  did  not 
appear  that  the  two  transactions  were  related  or  depen- 
dent on  each  other. 

§  43.  Adequacy  of  consideration.  Consideration  is  a 
legal  detriment  suffered  by  the  promisee  at  the  request  of 
the  promisor.  To  constitute  legal  detriment  it  is  neces- 
sary that  the  thing  surrendered  be  something  which  the 
promisee  has  the  right  to  retain  in  his  possession. 
Whether  the  thing  delivered  or  the  act  done  is  of  any 
intrinsic  value  or  results  in  a  benefit  to  the  promisor  is 
immaterial.  Indeed,  it  may  have  very  slight  value  in 
comparison  with  the  thing  promised  by  the  promisor  and 
still  be  sufficient  to  support  the  promise.  Tims,  if  A  gives 
B  $5  in  return  for  B's  promise  to  deliver  a  horse  worth 
$200,  the  contract  would  be  good.  The  promisor  has  an 
absolute  right  to  determine  upon  what  consideration  he 
will  consent  to  be  bound  (6).  If,  however,  the  owner  of 
the  horse  claimed  he  was  induced  to  promise  by  reason 
of  the  false  representations  of  A,  or  in  consequence  of  mis- 
representations or  undue  influence,  the  inadequate  price 
could  be  shown  as  evidence  of  fraud.  Standing  alone  it 
will  not  constitute  fraud,  and  if  the  contract  is  held  not 
binding  the  result  is  based  on  the  fraud  of  A,  and  not  on 
the  mere  inadequacy  of  the  consideration. 


(6)     Harriman,  Contracts  (2  ed.).  Sec.  98. 


FORMATION  OF  CONTRACTS  37 

§  44.  Benefit  of  the  promisor.  The  conclusion  that  a 
benefit  to  the  promisor  is  immaterial  is  illustrated  by 
numerous  cases.  Thus,  in  Bainbridge  v.  Firmstone  (7), 
A  permitted  B  to  take  certain  boilers  belonging  to  A  for 
the  purpose  of  weighing  them.  It  was  held  that  the  detri- 
ment suffered  by  him  in  giving  up  the  possession  of  the 
boilers  was  sufiicient  consideration  to  support  B's  prom- 
ise to  return  them,  although  it  did  not  appear  that  B  had 
in  any  way  derived  any  actual  advantage  from  the  agree- 
ment. The  act  refrained  from  or  done  may  be  an  actual 
benefit  to  the  promisee,  yet  if  it  is  something  he  had  a 
legal  right  to  do  or  not  to  do,  giving  up  this  right  is  a  con- 
sideration. In  Talbot t  v.  Stemmons  (8),  A  promised  to 
pay  B  $500  if  he  would  not  use  tobacco  during  the  life  of 
A.  B  abstained  and  was  allowed  to  recover  on  the  ground 
that  as  he  had  a  right  to  use  tobacco,  refraining  from  do- 
ing so  would  constitute  a  consideration.  In  ^Vhite  v. 
Bluett  (9),  the  defendant's  father  agreed  not  to  sue  on  a 
note  given  by  the  defendant  to  him  if  defendant  would 
cease  to  complain  that  he  had  not  been  treated  as  well  as 
the  other  children.  The  court  held  there  was  no  consid- 
eration since  defendant  had  not  suffered  a  detriment, 
inasmuch  as  he  had  no  right  to  complain  to  his  father. 

§  45.  Illusory  promises.  It  will  be  noted  that  the 
decision  in  the  above  case  might  properly  be  sustained  on 
the  ground  that  the  defendant 's  promise  was  so  indefinite 
that  the  court  could  not  tell  what  the  parties  meant  by  it. 


(7)  8  Adol.  &  E.  743. 

(8)  89  Ky.  222. 

(9)  23  L.  J.  R.    (Exchr.)   N.  S.  S6. 


Vol.  1—8 


38  CONTRACTS 

Thus,  in  Taylor  v.  Brewer  (10),  the  court  refused  to  en- 
force a  contract  on  the  ground  of  indefiniteness  where  A 
agreed  to  work  for  B  for  such  remuneration  as  B  deemed 
right.  On  the  other  hand  in  Dunton  v.  Dunton  (11),  A 
promised  his  divorced  wife  that  as  long  as  she  conducted 
herself  with  sobriety  and  in  an  orderly  manner  he  would 
pay  her  a  certain  annuity.  The  court  sustained  the  con- 
tract, saying  that  the  wife  had  a  perfect  legal  right  to  act 
in  a  disorderly  manner  and  her  agreement  not  to  do  so 
was  a  legal  detriment.  Probably  this  case  should  have 
been  decided  the  other  way,  on  the  ground  that  the  under- 
taking of  the  wife  was  too  indefinite. 

§  46.  Consideration  void  in  part.  It  sometimes  hap- 
pens that  the  consideration  is  void  in  part  owing  to  the 
nature  of  the  act  to  be  done  or  because  the  promisee  al- 
ready is  under  obligations  to  do  the  identical  act.  The 
promise  will  still  be  enforceable  if  any  part  of  the  consid- 
eration is  valid.  Thus,  in  Jamieson  v.  Eenwick  (12),  A 
agreed  to  pay  B  £25  annually,  provided  B  would  not  at- 
tempt to  reside  in  S,  visit  or  annoy  A  or  interfere  with 
him,  or  claim  or  attempt  to  claim  any  interest  in  A's  land. 
It  was  held  that  the  promise  not  to  annoy  was  nuga- 
tory since  plaintiff  had  no  right  to  do  so,  but  that 
the  other  considerations  named  in  the  agreement 
were  valid  and  sufficient  to  support  the  contract. 
Again,  if  A  promises  to  pay  B  one  hundred  dollars 
in  consideration  of  two  acts,  one  of  which  is  lawful, 


(10)  1  M.  &  S.  290. 

(11)  18  Vict.  L.  R.  114. 

(12)  17  Vict.  L.  R.  124. 


FORMATION  OF  CONTRACTS  39 

the  other  of  which  is  unlawful,  if  A  sues  B  he  can 
recover  for  the  nonperformance  of  the  lawful  act,  since 
if  A  is  willing  to  pay  the  entire  consideration  for  the  law- 
ful act,  he  is  entitled  to  recover  and  B  can  not  object.  If, 
however,  B  attempts  to  sue  A  he  cannot  recover  at 
all,  since  A  has  not  promised  to  pay  one  hundred  dollars 
except  on  the  promise  that  B  does  the  two  acts  contracted 
for  and  no  obligation  arises  until  these  acts  are  done, 
although  one  is  illegal.  If  B  had  performed  both  the  legal 
and  the  illegal  acts  he  would  still  be  unable  to  recover 
because  of  the  unlawful  nature  of  his  act. 

§  47.  Subscription  contracts.  Considerable  difficulty 
has  been  experienced  by  the  courts  in  determining  what 
constitutes  the  consideration  in  subscription  agreements 
(13).  The  commonest  form  in  which  the  question  is  pre- 
sented is  where  a  church  society  desiring  to  raise  funds 
to  pay  off  an  indebtedness  or  to  build  a  church  edifice  cir- 
culates a  subscription  paper,  which  is  usually  in  the  fol- 
lowing terms: 

'•We,  the  undersigned,  agree  to  pay  the  sum  set  oppo- 
site our  respective  names  to  the  trustees  of  the  X  church, 
the  amount  to  be  applied  in  the  discharge  of  the  church 

debt." 

Suppose  A  is  one  of  the  signers  of  the  paper  and  refuses 
to  pay.  Can  he  set  up  that  there  is  no  consideration  and 
therefore  his  promise  is  nothing  more  than  an  offer  which 
may  be  withdrawn  at  any  time!  The  majority  of 
courts  have  accepted  the  view  that  the  signing  of  a  sub- 
scription of  this  character  constitutes  an  offer  to  the 


(13)     Harriman,  Contracts  (2  ed.).  Sec.  128-13L 


40  CONTRACTS 

church  which  ripens  into  a  contract  when  the  church  does 
something  in  reliance  upon  the  offer.  In  the  ordinary 
case  of  an  offer,  the  offer  itself  stipulates  what  acts  will 
constitute  a  consideration,  but  in  this  particular  form  the 
offer  simply  stipulates  that  the  funds  shall  be  applied  to 
the  discharge  of  the  church  debt.  Applying  the  fund  to 
the  discharge  of  the  church  debt  could  not  be  the  consid- 
eration since  the  fund  could  not  be  applied  until  paid  into 
the  hands  of  the  society.  The  difficulty  is  in  determining 
just  what  act  will  constitute  an  acceptance.  It  does  not 
seem  sound  to  say  that  any  act,  whether  immediately  con- 
nected with  the  purpose  for  which  the  fund  was  offered  or 
not,  would  be  a  consideration. 

It  is  frequently  held,  however,  that  where  the  trustees 
go  ahead  and  secure  other  subscriptions  such  an  act  will 
constitute  an  acceptance;  also,  where  the  subscription  is 
for  the  purpose  of  building  a  church  edifice  and  the  trus- 
tees incur  obligations  in  furtherance  of  that  purposes, 
such  acts  constitute  an  acceptance  of  the  offer.  Still  other 
courts  have  attempted  to  sustain  a  contract  on  the  theory 
that  each  subscriber  agrees  to  give  the  amount  stipulated 
in  consideration  of  the  promise  of  every  other  subscriber 
to  do  the  same,  and  the  subscription  paper  is  frequently 
drawn  in  pursuance  of  this  idea.  Thus,  the  following 
form  is  not  uncommon:  ''We,  the  undersigned,  in  consid- 
eration of  the  promises  of  each  other,  mutually  agree  to 
pay  the  sum  set  opposite  our  respective  names  for  the  pur- 
pose of  erecting  a  church  at  X. "  Two  difficulties  are  pre- 
sented in  a  subscription  of  this  form:  first,  as  the  sub- 
scriptions are  not  all  taken  at  the  same  time,  it  is  difficult 
to  see  how  the  act  of  A  in  signing  can  be  a  consideration 


FORMATION  OF  CONTRACTS  41 

for  the  promise  of  B,  who  signs  at  a  later  period ;  and  sec- 
ondly, the  promises  do  not  appear  to  be  made  to  the 
church  but  to  subscribers,  and  even  if  the  contract  were 
good  it  would  seem  that  the  church  is  not  a  party  to  the 
agreement.  Owing  to  these  difficulties,  the  majority  of 
courts  have  generally  accepted  the  view  announced  in  the 
case  of  Presbyterian  Church  v.  Cooper  (14),  where  it 
was  held  that  the  subscription  was  an  offer  which  would 
ripen  into  a  contract  on  showing  that  the  church  had 
done  some  act  at  the  request  of  the  defendant  and  in  reli- 
ance upon  his  subscription. 

From  the  language  of  the  courts,  it  would  seem  fair 
to  state  that  the  ordinary  rules  of  contract  are  not  applied 
strictly  in  this  class  of  cases.  In  the  presence  of  a  strong 
moral  obligation,  the  courts  have  constructed  a  theory  of 
consideration  that  will  render  the  subscriber  liable  but 
which  they  would  hesitate  to  apply  to  an  ordinary  con- 
tract. The  ordinary'  subscription  is  in  reality  merely  a 
conditional  gift,  and  on  principle  should  not  be  enforce- 
able at  law. 

§  48.  Composition  with  creditors.  Still  another 
group  of  cases  presents  an  apparent  exception  to  the  rule 
that  all  contracts  must  be  supported  by  a  consideration. 
Thus,  where  a  debtor  makes  an  agreement  with  his  cred- 
itors whereby  the  creditors  agree  to  accept  fifty  cents  on 
the  dollar  in  return  for  the  debtor's  promise  to  pay  that 
amount,  it  would  seem  that  inasmuch  as  the  creditors  are 
entitled  to  one  hundred  cents  on  the  dollar,  their  promise 
to  accept  one-half  the  amount  could  not  operate  as  a  con- 


(14)     112  N.  Y.  517. 


42  CUNTKACTS 

sideration.  Such  compromises  are,  liowever,  usually  sus- 
tained by  the  courts,  either  on  the  theorj-  that  the  consid- 
eration consists  in  tlie  undertaking  of  a  debtor  to  secure 
the  consent  of  all  other  creditors  to  the  surrender,  or  that 
the  creditors  mutually  agree  with  each  other  for  the  bon- 
efit  of  the  debtor  (15).  Settlements  under  the  bankruptcy 
act,  whereby  the  debtor  is  discliarged,  do  not  come 
within  the  rule,  as  his  discharge  is  not  based  upon  con- 
tract, but  upon  an  express  provision  of  the  law- 

ji  49.  Performing  or  promising  to  perform  a  contract 
obligation.  Doing  what  one  is  already  l)ound  to  do  is  not 
a  good  consideration.  Thus,  in  the  leading  caie  of  Foakcs 
V.  Beer  (16),  A  had  obtained  a  judgment  against  B,  and 
an  agreement  was  made  by  which  B  promised  to  pay  the 
judgment  in  installments  and  A  agreed  to  accept  tlie 
same.  After  all  the  installments  were  paid,  A  sued  B  for 
the  interest  which  had  accrued  on  the  judgment  and  it  was 
held  that  he  could  recover,  since  B  by  the  terms  of  the 
judgment  was  bound  to  pay  interest  and  his  agreement 
to  pay  the  judgment  was  a  mere  promise  to  do  something 
he  was  already  bound  to  do  and  there  could  be  no  con- 
sideration for  A's  agreement  to  release  the  claim. 

If,  however,  the  agreement  is  that  the  debtor  shall  pay 
at  a  different  place  or  pay  in  a  different  manner,  this  will 
constitute  a  detriment  and  support  a  promise  on  the  part 
of  the  other  party  to  accept  the  act  in  satisfaction.  In  the 
case  of  Jaffray  v.  Davis  (17),  A  gave  his  notes  for  $3462 
to    B,    which   were    accepted    in    complete    satisfaction 


(15)  Anson,  Contracts   (HufEcut's  2  ed.),  120,  note. 

(16)  L.  R.  9  App.  Cas.  605. 

(17)  124  N.  Y.  164. 


FOKMATIOX  UF  CONTRACTS  43 

of  a  debt  of  $7714  due  to  B.  It  was  held  that  B  could  not 
afterwards  sue  for  the  debt  since  A  had  given  his  note 
which  he  was  not  bound  to  do,  and  which,  therefore,  would 
constitute  a  consideration.  The  same  rule  is  applied  in 
the  case  of  employment.  Thus,  in  Stilk  v.  Myrick  (18), 
A  shipped  for  a  voyage  as  a  seaman.  Owing  to  the  deser- 
tion of  some  of  the  crew  the  vessel  was  shorthanded  and 
the  master  promised  to  pay  additional  wages  to  the 
remaining  seamen,  if  they  would  work  the  vessel  home. 
It  was  held  that  this  promise  of  additional  wages  was 
without  consideration,  since  it  was  the  duty  of  A  under 
this  original  contract  to  assist  in  working  the  vessel  home. 
He  is,  therefore  doing  merely  what  he  is  already  bound 
to  do.  If  the  acts  to  be  done  by  the  seaman  under  the 
second  agreement  had  been  in  addition  to  those  prescribed 
under  his  original  contract  he  could  recover.  In  Turner 
V.  Owen  (19),  the  vessel  proved  unsea worthy,  and  the 
crew  agreed  to  remain  on  the  vessel  in  consideration  of 
additional  wages  and  it  was  held  they  could  recover, 
since  it  was  not  their  duty  under  the  contract  to  remain 
with  an  unseaworthy  vessel. 

AVhile  the  rule  illustrated  is  generally  accepted,  yet  the 
cases  show  that  the  courts  are  quick  to  seize  upon  any 
act  that  will  defeat  the  rule.  Even  trivial  acts  will  serve 
as  a  consideration  provided  the  debtor  was  not  already 
bound  to  perform  them.  In  Pinnel's  Case  (20),  one  of  the 
original  cases  establishing  the  doctrine,  the  court  resolved 
that  the  payment  of  a  lesser  sum  on  the  day  in  satisfac- 


(18)  2  Camp.  317. 

(19)  3  F.  &  F.  176. 

(20)  5  Co.  Rep.  117. 


44  CONTRACTS 

tion  of  a  greater  can  not  be  a  satisfaction  of  the  whole,  yet 
the  gift  of  a  horse,  a  hawk,  a  robe,  or  a  peppercorn,  in 
satisfaction  is  good,  for  it  shall  be  intended  that  these 
articles  are  as  valuable  to  the  creditor  as  the  money  itself. 

§50.  Same:  Apparent  exceptions  to  the  rule.  Al- 
though the  above  nilo  is  gcnorally  accepted  by  the 
courts,  there  are  numerous  decisions  that  ap])arently  con- 
stitute exceptions  to  it.  After  parties  have  entered  into  a 
contract,  and  before  a  breach  has  occurred  by  either 
party,  it  is  perfectly  legal  for  them  to  abandon  the  agree- 
ment. The  mutual  giving  up  of  their  rights  will  constitute 
the  consideration.  As  soon  as  the  old  agreement  is  ended 
the  parties  are  at  liberty  to  enter  into  a  new  contract, 
on  any  terms  they  see  fit.  If,  however,  one  party  refuses 
to  carry  out  his  promises,  and  the  other  party  in  order  to 
induce  him  to  do  so,  promises  to  pay  a  further  sum,  it 
would  seem  that  under  the  rule  no  recovery  could  be  had, 
since  there  is  no  consideration  to  support  the  promise. 

In  Lattimore  v.  Ilarsen  (21),  A' agreed  to  open  a  cart- 
way through  B's  premises  for  an  agreed  sum.  A  became 
dissatisfied,  and  B  told  A  to  go  ahead  and  complete  the 
cartway,  and  he  would  pay  him  for  his  services  and  mater- 
ials. In  an  action  on  this  latter  promise,  the  court  held 
A  could  recover,  as  the  evidence  showed  the  old  contract 
was  abandoned.  In  Vanderbilt  v.  Schreyer  (22),  A  con- 
tracted to  erect  buildings  for  B.  B  assigned  the  contract 
to  C.  A  refused  to  proceed  unless  0  would  guarantee  cer- 
tain bonds.    C  refused  and  A  stopped  work.    Later  C  gave 


(21)  14  Johns.  330. 

(22)  91  N.  Y.  392. 


FORMATION  OF  CONTRACTS         45 

the  required  guaranty  and  the  work  was  completed.  In  a 
suit  on  the  guaranty,  it  was  hold  C  was  not  liable,  as  A 
had  given  no  consideration  since  he  was  already  bound  to 
complete  the  building.  The  majority  of  the  American 
and  tlie  Knglish  courts  agree  with  the  last  case.  A  minor- 
ity of  the  American  courts  reach  a  different  result 
although  they  accept  the  view  tliat  a  promise  to  do  what 
one  is  already  bound  to  do  is  not  a  consideration,  holding 
the  old  ('(jntract  Ls  rescinded  as  a  result  of  the  new 
contract. 

While,  as  already  shown,  such  a  rescission  is  possible 
it  sccMis  clear  that  in  most  of  the  cases,  the  facts  will  not 
warrant  the  conclusion  that  a  rescission  was  intended.  It 
is  usually  clear  that  the  new  promise  is  given  to  induce 
the  performance  of  the  original  contract,  and  such  should 
have  been  the  inference  in  Lattimore  v.  llarsen  (21), 
above. 

§  51.  Promises  to  third  persons.  We  have  seen  that 
wliere  A  has  entered  into  a  contract  with  B  and  subse- 
qu(;ntly  promises  to  perform  or  perfonns  the  thing  stip- 
ulated for  in  the  original  contract,  in  return  for  a  prom- 
ise of  additional  compensation  by  B,  that  this  contract 
is  not  enforceable  for  want  of  consideration.  Is  the  rule 
the  same  where  the  promise  is  made  to  a  third  person? 
Thus,  A  enters  into  a  contract  with  B  to  build  a  house  for 
B.  C,  who  owns  the  land  near  the  lot  of  B,  where  the 
house  is  to  be  erected,  promises  to  pay  A  $100  if  he  will 
promise  to  carry  out  his  contract  with  B.  Can  A  recover 
from  C  this  amount! 


40  CONTRACTS 

The  English  courts  hold  that  he  can,  on  the  ground  that 
by  promising  C  he  has  entered  into  an  ohiigatioii  which 
heretofore  did  not  exist,  since  he  has  now  become  })ound 
to  C  to  do  an  act  whicli  lieretofore  he  was  only  hound  to 
do  for  V).  The  English  courts  go  even  further  tli.iu  tills 
and  hold  that  where  C  says  to  A,  "If  you  wi!l  carry  out 
your  contract  with  B,  I  will  pay  you  $HK),"  A  can  recover. 
In  this  case  A  has  not  promised  C  to  carrj'  out  his  con 
tract  with  B  and  the  consideration  relied  upon  is  tlie 
actual  carrying  out  of  the  contract.  Thus,  in  the  case  of 
Shadwell  v.  Shad  well  (23),  A  was  engaged  to  marr\'  I> 
and  wrote  to  his  uncle  C  announcing  that  fact.  (,'  rejilied, 
expressing  his  approval  of  the  engagement,  and  said, 
**As  I  promised  you  I  will  pay  you  £500  a  year  until 
your  income  as  a  chancery  solicitor  reaches  that  sum." 
A  married  B  and  brought  an  action  on  the  annuity  prom- 
ised. The  court  held  he  could  recover,  in  spite  of  the 
objection  that  A  had  merely  carried  out  the  contract  he 
had  already  made  with  B  and  that  it  did  not  appear  that 
he  had  married  at  a  different  time  in  consequence  of  the 
promise  of  C. 

Even  where  A  gives  his  promise  to  carry  out  his  con- 
tract with  a  third  person,  it  would  seem  that  is  no  con- 
sideration unless  a  promise  alone  is  consideration.  It  is 
frequently  stated  that  mutual  promises  constitute  a  con- 
sideration for  each  other.  If  this  proposition  were  strictly 
true,  then  a  promise  to  receive  a  gift  would  give  rise  to 
a  contract,  but  this  is  nowhere  admitted.  An  examina- 
tion of  the  cases  indicates  that  promises  will  only  be 


(23)     30  L.  J.  R.  C.  p.  145. 


FORMATION*  OF  CONTRACTS  47 

regarded  as  consideration,  where,  if  carried  out,  they 
will  result  in  a  legal  detriment.    Thus,  if  A  promises  B 
to  pay  $*250  when  he  owes  him  $500,  in  return  for  B's 
promise  to  release  the  entire  claim,  we  have  an  exchange 
of  promises,  but  the  agreement  is  not  binding  since  A's 
promise  when  completed  would  merely  be  an  act  which  he 
was  already  bound  to  perform.     If,  on  the  other  hand, 
A  promised  to  deliver  a  horse  to  B  in  return  for  B's  prom- 
ise to  release  a  claim  for  $500,  the  contract  would  be 
good,  since  the  delivery  of  a  horse  was  something  not 
required  by  the  original  contract  and  giving  it  will  be  a 
legal  detriment.    L^gal  authors  are  not  in  accord  as  to 
the  theory  on  which  mutual  ]^romises  are  enforced  (24). 
§  52.    Performance  of  a  non-contract  obligation.    We 
have  already  seen  that  the  mere  doing  what  one  is  already 
under  contract  to  do  with  another  cannot  constitute  a  con- 
sideration.   On  the  same  principle,  the  doing  or  promis- 
ing to  do  an  act  which  a  person  is  already  bound  to  do  by 
law,  or  the  refraining  from  doing  of  something  which  a 
]>erson  has  no  legal  right  to  do  can  not  constitute  a  con- 
sideration, since  it  cannot  be  a  legal  detriment.     Thus, 
where  an  offer  of  a  reward  is  made  for  the  apprehension 
of  a  criminal  and  an  officer  whose  duty  it  is  to  apprehend 
criminals  makes  the  arrest,  he  cannot  claim  the  reward, 
since  he  has  merely  done  what  he  is  already  bound  to  do, 
and  will  not  be  permitted  to  say  he  has  performed  his  duty 
on  reliance  upon  a  particular  offer  (25). 
If.  however,  the  act  done  in  reliance  upon  the  offer  is 


(24)  Wald's   Pollock.   Contracts    (Williston's   ed.).   2W. 

(25)  GlUmore  v.  Lewis,  12  Oh    St  2S1. 


48  CONTRACTS 

one  which  the  perfomior  was  not  bound  to  do  as  the 
result  of  his  official  duty,  a  good  contract  will  arise.  In 
Reif  V.  Paige  (20),  A,  whose  wife's  body  was  supposed  to 
be  in  a  hotel  which  was  on  fire,  said  tiiat  he  would  give 
$1000  to  any  one  who  would  bring  out  the  body.  B,  a 
fireman,  went  into  the  building,  and  brought  out  the  body. 
In  an  action  to  recover  the  reward,  it  was  contended  tliat 
B  had  merely  done  what  he  was  bound  to  do  as  a  fireman, 
but  the  court  held  that  tlie  duty  of  a  firenuui  did  not 
embrace  entering  a  burning  building  at  the  risk  of  life 
for  such  a  purjwse,  and  therefore  the  act  would  furnish 
a  consideration  for  the  promise.  Similarly  in  the  case 
of  Harris  v.  More  (27),  the  court  held  that  an  officer  who 
bad  gone  outside  of  his  jurisdiction  for  the  i)ur]iose  of 
collecting  evidence,  could  recover  the  reward  offered  for 
such  evidence,  since  it  was  not  his  duty  to  procure  it. 

§  53.  Compromise  or  forbearance  of  a  claim.  The 
law  favors  any  conduct  between  disputants  that  will  re- 
sult in  limiting  litigation.  Accordingly  the  courts  look 
with  great  favor  on  the  compromise  or  forbearance  of 
suits.  It  is  not  necessary  that  a  claim  be  actually  in  suit  in 
order  that  its  withdrawal  may  be  the  basis  of  a  settlement, 
but  if  A  makes  a  claim  against  B  in  good  faith,  which  B 
disputes,  and  it  is  aftei-wards  agreed  that  A  will  give  up 
his  claim  in  consideration  of  the  payment  of  a  less  sum, 
the  court  will  ordinarily  sustain  such  a  transaction.  It 
is  apparently  immaterial  that  A's  claim  is  not  well 
founded  in  law.    In  Callisher  v.  Bischoffsheim  (28),  it 


(26)  55  Wis.  496. 

(27)  70  Cal.  502. 

(28)  L.  R.  5  Q.  B.  449. 


FORMATION  OF  CONTRACTS  49 

appeared  that  A  had  a  claim  against  the  government  of 
Honduras,  and  in  consideration  that  he  would  forbear 
the  claim  for  a  certain  time,  B  agreed  to  give  certain 
securities.  In  a  suit  on  this  contract  by  A,  B  set  up  that 
no  money  was  due  A  from  the  government  of  Honduras. 
The  court  held,  however,  that  if  the  plaintilf  had  made  a 
claim  in  good  faith  and  had  forbonie  to  press  it  in  con- 
sideration of  the  promise  of  defendant,  defendant  would 
be  liable.  In  some  jurisdictions,  however,  the  courts  have 
laid  down  a  more  stringent  rule.  Thus,  in  Gunning  v. 
Koyal  (-1)),  it  appears  that  A  had  hired  a  horse  of  B 
which  was  driven  by  an  incompetent,  inexperienced 
employee  of  B,  and  as  a  result  of  the  driver's  negligence 
the  horse  was  killed.  B  demanded  that  A  pay  for  the 
horse,  and  A  gave  his  note  in  settlement.  In  suit  on  the 
note,  he  set  up  the  want  of  consideration.  The  court  held 
that  there  was  no  consideration.  The  loss  was  due  not  to 
the  negligence  of  A,  but  to  the  incompetence  of  B's  own 
sei-vant.  The  court  stated  the  law  as  follows:  ''The 
existence  of  a  dispute  or  controversy  between  parties  is 
not  a  suflQcient  consideration  to  support  a  promise  to  pay 
money  in  settlement  of  it,  where  no  valid  demand  for  any- 
thing whatever  exists  in  favor  of  the  promisee." 

It  would  seem  on  principle  that  the  majority  rule  should 
be  sustained,  since  otherwise  the  policy  of  the  law  to 
encourage  compromises  would  be  largely  defeated,  as  the 
only  claims  that  could  be  compromised  at  all  would  be 
those  that  were  doubtful  in  law  or  in  fact.  The  parties 
to  such  settlements  are  protected  by  the  further  rule  that 


X29)     69  Miss.  45. 


50  CONTRACTS 

if  the  claim  which  is  the  hasis  of  compromise  was  entirely 
unfounded,  so  that  no  reasonable  man  having  knowledge 
of  the  facts  that  were  in  possession  of  the  {H)mplainant 
would  have  believed  tliat  he  had  a  claim,  that  would 
usually  be  sufficient  evidence  to  show  that  the  claim  was 
made  in  bad  faith. 

i;  54.  An  actuaJ  claim  must  be  presented.  A  jiromise 
given  for  the  |)iir)>ose  of  lulling  into  security  possible 
claimants  will  not  result  in  a  contract  of  conipromise, 
unless  an  actual  definite  claim  of  some  sort  lias  been  made 
against  the  party  promising.  This  is  illustrated  by  the 
case  of  Miles  v.  New  Zealand  Co.  (30).  At  a  meeting  of 
the  stockholders  of  the  New  Zealand  Company,  great  dis- 
satisfaction was  expressed  on  account  of  representations 
made  by  A  who  had  been  the  principal  i)romoter  ol  the 
company.  A  accordingly  promised  that  he  would  guaran- 
tee certain  dividends  on  the  stock  for  a  fixed  period.  The 
company  later  sought  to  enforce  this  promise,  but  it 
was  held,  since  no  actual  claim  had  been  made  against  A 
on  account  of  his  representations,  the  promise  by  A  must 
be  regarded  as  a  mere  statement  upon  which  the  company 
had  not  relied  and  cannot  now  recover. 

§  55.  Forbearance  to  sue.  It  is  not  necessary  in  order 
that  a  promise  may  be  enforceable  that  the  promisee  in 
turn  promise  to  forbear  his  claim.  It  is  enough  if  he 
actually  does  forbear  for  a  reasonable  time  in  reliance  on 
the  promise.  In  the  case  of  the  Alliance  Bank  v.  Broom 
(31)  A  had  a  claim  against  B  which  was  due  and  on  which 


(30)  L.  R.  32  Ch.  D.  266. 

(31)  2  Drew  &  Sm.  289. 


FORIVIATION  OF  CONTRACTS  51 

he  was  pressing  for  payment.    He  demanded  security  and 
B  offered  certain  collateral  if  A  would  not  bring  an  action. 
An  action  was  brought  by  A  against  B  to  recover  on  this 
promise,  and  it  was  held  that  although  A  was  not  bound 
not  to  sue  on  the  original  claim,  yet  as  he  actually  did  for- 
bear in  reliance  upon  B's  promise  to  furnish  the  secur- 
ities, he  could  recover.  Even  in  a  case  where  A  promised 
the  creditor  to  guarantee?  a  certain  debt  if  the  creditor 
would  forbear  to  press  for  immediate  pajnnent,  some  of 
the  judges  in  the  case  held  that  this  would  constitute  a 
good  consideration,  since  the  word  "immediate"  would 
be  const nied  to  mean  forbearance  for  a  reasonable  time 
(32).     What  is  a  reasonable  time  is  determined  by  the 
facts  of  each  particular  case.    Usually  the  time  is  indi- 
cated by  the  terms  of  the  contract  or  the  circumstances 
surrounding  the  parties  at  the  time  it  was  made.    In  The 
Traders'  National  Bank  v.  Parker  (33),  A  signed  a  note 
as  guarantor,  which  B  owed  to  C,  in  consideration  of  the 
forbearance  of  a  suit  against  B.    In  an  action  on  the  guar- 
anty,  it   was   claimed   there   was  no   consideration.     It 
appeared  that  A,  who  was  also  a  creditor  of  B,  signed  the 
guaranty  for  the  puq^ose  of  delaying  action  in  order  that 
he  might  inquire  into  certain  assets  of  B  in  the  hope 
that  they  would  be  sufficient  to  pay  both  claims,  if  a 
proper  disposition  of  them  could  be  made.    It  was  accord- 
ingly held  on  these  facts  that  a  forbearance  for  a  suffi- 
cient period  to  enable  A  to  examine  this  property  was 
contemplated. 


(32)  Oldershaw  &  Musket  v.  King.  2  Hurl.  &  Nor.  399,  517. 

(33)  130  N.  Y.  415. 


52  .     CONTRACTS 

Actual  forbearance,  however,  will  not  be  sufficient  to 
support  a  promise  where  it  is  clear  that  the  parties  in- 
tended that  the  promisee  should  promise  to  forln^ar.  In 
Strong  V.  Jiiheffield  (iU),  A  proniiseil  not  to  sue  until  ho 
needed  the  money,  in  consideration  of  B's  i)r()mise  to 
guarantee  the  debt  of  C  to  A.  The  court  held  that  tho 
promise  not  to  sue  until  he  needed  the  money  was  too 
indelinlte  and  imposed  no  obligation  on  A,  and  was  there- 
fore invalid.  It  was  claimed,  however,  that  A  liad  in  fact 
forborne  in  reliance  on  the  promise,  but  the  court  said 
this  could  not  constitute  a  consideration  since  B  had  con- 
templated a  i>romisc  in  exchange  for  his  promise,  and  not 
a  mere  act  of  forbearance 

§  56.  Pa-st  consideration.  Jt  has  already  been  shown 
that  in  order  that  an  act  be  a  consideration  for  a  promise 
or  a  promise  for  a  promise,  that  they  must  be  given  in 
exchange  for  each  other  and  in  reliance  upon  each  other. 
Therefore,  if  the  act  which  Is  relied  upon  as  a  considera- 
tion was  done  before  any  promise  was  made  it  will  not 
support  a  subsequent  i)romise.  In  Koscorla  v.  Thomas 
(35),  A  contracted  to  sell  a  horse  to  B.  Later  B  refused 
to  take  it  imless  A  warranted  that  the  horse  was  not  over 
j&ve  years  old,  and  also  that  it  was  not  vicious.  A  gave 
his  promise  to  this  effect  and  B  sued  him  for  breach  of  it. 
It  was  held  he  could  not  recover  since  there  was  no  con- 
sideration to  support  the  promise.  The  purchase  price 
which  B  agreed  to  pay  could  not  be  a  consideration  for 
this  new  promise,  since  it  was  given  for  A's  promLse  to 


(34)  144  N.  Y.  392. 

(35)  3  Q.  B.  R,  234. 


FOR^LVTION  OF  CONTRACTS  53 

sell  the  horse,  and  before  the  promise  sued  upon  was 
made. 

§  57.    Same:  Apparent  exceptions  to  the  rule.     Cer- 
tain cases  at  tirst  sight  appear  contrary  to  this  rule.    In 
Lampleigh  v.  Brathwait  {06),  the  leading  case  on  the  sub- 
ject, it  appeared  that  A  at  the  request  of  B,  who  had  com- 
mitted a  crime,  endeavored  to  obtain  a  pardon  from  the 
king,  and  made  a  journey  to  the  court  for  that  purpose. 
Afterwards  in  consideration  of  these  acts  B  promised  to 
pay  £100  for  which  action  was  brought.     It  was  held 
that  A  could  recover,  the  court  intimating  that  as  the  act 
was  done  at  the  request  of  B,  although  no  action  would 
have  lain  in  the  absence  of  a  promise,  yet  the  past  acts 
would  nevertheless  support  the  subseciuent  promise.    This 
case  has  been  explained  on  a  ground  which  makes  it  con- 
sistent with  the  modem  rule,  namely,  that  inasmuch  as  B 
requested  A  to  perform  services  for  him  under  circum- 
stances that  would  indicate  an  intention  on  his  part  to 
pay  for  the  same,  an  action  would  lie  for  the  amount  irre- 
spective of  the  express  promise,  the  office  of  the  express 
promise  being  merely  to  serve  as  evidence  that  the  ser- 
vices were  actually  to  be  performed  with  the  intent  that 
they  should  be  paid  for  and  were  not  merely  gratuitous 
(37).    The  modem  cases  are  in  accord  with  this  state- 
ment.   In  Hatch  v.  Purcell  (38),  an  action  was  brought 
by  A,  who  had  been  an  inmate  of  B's  household  for  many 
years  and  had  assisted  in  the  work  of  the  house  and  the 
management  of  the  household  affairs.     Afterwards  B 


(36)  Hobart,   105. 

(37)  Kennedy  v.  Broun.  13  C.  B.  (N.  S.)  677. 

(38)  1  Foster  (N.  H.)  544. 

Vol   1—9 


54  CONTRACTS 

requested  A  to  brin^'  in  a  bill  for  services,  Tliis  recjuest 
was  taken  by  the  court  as  evidence  that  A's  position  in  the 
household  was  that  of  a  ser\'ant  and  not  of  a  mere  depen- 
dent, and  tluTcfore  that  she  might  have  rei'overe<l  irre- 
spective of  the  express  promise.  Wlicrc  a  person,  as  a 
son  or  dauj^htcr,  continues  to  reside  at  home  Jifter  reach- 
ing legal  age,  the  presumption  is  that  such  services  as 
may  be  ren<lere<l  are  gratuitous,  an<l  no  recovery  can  Ik» 
had  in  the  absence  of  an  afTinnative  agre^'ment. 

There  are  many  cas«*«  where  A  has  |)erformed  services 
for  H  at  the  hitter's  re<iuest,  wliere  H  has,  after  the  service 
has  been  completed,  promised  to  pay  a  fixe<i  sum.  In 
such  cases  the  j)romise  to  pay  a  fi.xed  sum  is  rtM-eived  as 
evidence  of  the  value  of  the  .ser%'ices.  If  A  had  brought 
ail  action  for  the  services  without  any  agre<'ment  being 
made  as  to  the  amount,  he  would  be  entitled  to  recover 
the  amount  which  the  jur>'  shouM  find  on  proper  evidence 
was  the  fair  value  of  the  ser\'ices.  Wliere  B  promises 
to  pay  A  a  fixed  sum  and  A  assents  to  the  same  by  bring- 
ing an  action  for  that  sum,  it  amounts  to  an  agreement 
between  A  and  B  that  the  fair  value  of  the  services  is  the 
sum  named.  This  agreement  is  suy>ported  by  a  perfectly 
valid  consideration  since  both  A  and  B  have  given  up 
their  right  to  have  a  jur>'  pass  on  the  question  of  value, 
and  the  giving  up  of  this  right  wouhl  constitute  a  detri- 
ment and  consideration.  In  Wilkinson  v.  Oliveira  (3!)). 
A  loaned  a  letter  to  B  to  be  used  by  the  latter  in  aiding 
him  to  perfect  a  claim  to  an  estate.  It  appeared  that  the 
loan  was  made  under  circumstances  showing  an  intent 


(39)     1  Blng.  N.  Cas.  490. 


FOmLVTIOX  OF  CONTRACTS  55 

to  be  paid,  so  A  might  have  recovered  the  reasonable 
value  of  the  use.  Afterwards  B  promised  to  pay  A 
£l()()()  and  ho  was  allowed  to  recover  on  the  above 
principle. 

55  58.  Moral  consideration.  The  fact  that  A  has  ren- 
dered services  for  B  wliich  morally  would  entitle  him  to 
recover  will  not  be  enough  to  sustain  an  action.  If  A 
rescues  B  from  drowning,  there  is  perhaps  a  moral  obliga- 
tion for  B  to  ])ay  a  reward,  particularly  if  A  sustained 
loss  as  a  result  of  his  act,  but  B  would  not  be  liable 
although  he  aftervvards  promised  to  pay  a  fixed  sum.  In 
Mills  V.  Wyman  (40),  the  adult  son  of  A  became  ill  whUo 
penniless  and  among  strangers,  and  was  nursed  by  B. 
A  was  not  legally  liable  for  services  rendered  to  his  adult 
child.  A  afterwards  jiromised  B  to  pay  him  the  value 
of  his  8er\'ice8.  It  was  held  he  could  not  recover  since 
B  had  not  undertaken  the  care  of  the  son  in  reliance 
upon  any  promise  of  A.  In  such  a  case  there  is  "every 
moral  reason  why  A  should  compensate  B  for  his  serv- 
ices, but  no  recovery  can  be  had  in  law. 

§  59.  Sajne:  Apparent  exceptions  to  the  rule.  Cer- 
tain cases  are  frequently  cited  to  sustain  the  proposition 
that  a  moral  consideration  will  support  a  promise,  but 
on  examination  it  appears  that  they  really  do  not  sustain 
this  rule,  and  are  not  exceptions  to  the  general  proposi- 
tion. In  Lee  v.  Muggeridge  (41),  B,  a  married  woman, 
gave  a  bond  to  secure  an  advance  made  by  A  to  B's  son, 
After  the  death  of  B  's  husband  she  wrote  to  A  promising 


(40)  3  Pick.  207. 

(41)  5  Taunt.  36. 


56  CONTRACTS 

that  her  executors  would  pay  the  bond.  The  court  held 
that  while  the  bond  j^iven  l)y  H  was  unenforceable,  yet 
the  promise  given  aftcnvards  when  she  was  unmarried 
and  therefore  capable  of  making  a  contract  would  support 
the  obligation  to  pay.  This  case,  fro.iiucntly  cited  to  sus- 
tain the  j)roposLtion  that  a  moral  consideration  will  sup- 
port a  promise,  has  b(H'n  much  criticised  and  ni>  longer 
represents  tiie  law. 

Where  a  person  under  a  legal  obligation  to  pay  a  sum 
of  money  is  discharged  by  act  of  law,  as  wliere  A  indebted 
to  B  goes  into  bankruptcy  and  is  discharge<l  from  his 
obligation  as  a  result  of  such  procee«lings,  if  he  after- 
wards ])romises  H  to  pay  the  amount,  B  can  recover;  not 
on  the  grounil,  however,  that  the  moral  obligation  to  pay 
the  debt  honestly  incurred  will  constitute  a  consideration, 
but  on  the  theory  that  the  discharge  in  bankruptcy  is 
merely  a  defense  which  the  law  has  given  to  the  debtor 
and  which  he  may  use  or  not  at  his  pleasure.  Accordingly 
if  he  agrees  not  to  use  it,  it  constitutes  a  waiver  which 
prevents  him  from  setting  up  the  discharge  (42). 

The  same  rule  applies  in  the  case  of  debts  which  are 
barred  by  the  statute  of  limitations.  Thus,  if  B  owes  A 
a  sum  of  money  which  has  been  due  for  the  period  of  time 
provided  by  the  statute  of  limitations,  if  A  sues  B  to  col- 
lect, B  can  set  up  the  statute  as  a  defense.  Like  the  dis- 
charge in  bankruptcy  most  courts  regard  the  statute  of 
limitations  as  a  defense  which  may  be  used  or  not  at  the 
pleasure  of  the  debtor.  Accordingly,  if  he  acknowledges 
the  debt,  it  will  operate  as  a  waiver  of  such  a  defense  (43). 


(42)     Dusenbury  v.  Hoyt,  53  N.  Y.  521. 


FORMATION  OF  CONTRACTS  57 

In  many  jurisdictions  by  virtue  of  statutes,  a  waiver  of 
the  statute  can  only  be  made  in  writing  signed  by  the 
debtor. 

i;  60.  Action  on  the  original  contract.  Tlie  action  to 
recover  in  this  class  of  cases  is  on  the  old  contract,  the 
new  promise  being  received  merely  for  the  purpose  of 
showing  that  the  defense  which  would  otherwise  be  avail- 
able to  the  defendant  has  been  waived.  This  is  indi- 
cated clearly  in  the  case  of  Ilsley  v.  Jewett  (43),  above, 
where  the  action  was  on  a  bond  given  by  A  that  B,  a 
debtor  committed  to  i^rison  for  debt,  would  not  exceed  the 
prison  limits  of  a  certain  town.  After  the  debt  had  been 
barred  by  the  statute  of  limitations,  a  new  promise  was 
given  by  B  to  pay  tlie  debt,  which  operated  as  a  waiver 
of  the  statute.  In  the  meanwhile,  the  prison  limits  of  the 
town  had  been  changed  so  that  if  the  action  was  on  the 
new  promise,  there  could  be  no  recovery  since  the  defen- 
dant had  not  exceeded  the  new  limits,  but  the  court  held 
the  bond  was  forfeited  since  the  action  was  in  reality  on 
the  old  contract  and  the  prison  limits  in  force  at  that  time 
would  control. 

§  61.  Original  obligation  void.  If  by  reason  of  the 
legal  incapacity  of  a  party,  as  in  the  case  of  married 
women  at  common  law,  a  contract  is  absolutely  void,  a 
subsequent  promise  to  pay  after  the  disability  has  been 
removed  will  not  give  rise  to  an  obligation,  since  the  sub- 
sequent promise  can  only  be  regarded  as  a  waiver  of  a 
defense  to  a  contract  which  otherwise  was  perfectly  valid. 
In  some  jurisdictions,  however,  the  rule  as  to  contracts  of 


(43)     Kent  v.  Rand,  64  N.  H.  45;  Ilsley  v.  Jewett,  3  Met  439. 


58  CONTKAITS 

married  women  has  been  moditied,  so  that  such  contracts 
may  be  regarded  as  merely  unenforceable   whih'  the  mar 
riage  subsists,   but  otherwise  valid.  The  same  rule  would 
be  applied  as  in  the  case  of  the  waiver  of  the  statute  of 
limitations,  or  of  defense  in  bankru|)tcy  (44). 


(44)     Gouldlng  V.  Davidson,  26  N.  Y.  604. 


CHAPTER  IV. 

CONTRACTS  UNDER  SEAL.    PARTIES. 

§  62.  Definition.  A  contract  under  seal  or  specialty 
is  an  undertaking  in  writing  formally  solemnized 
by  the  seal  of  the  party  (1).  It  was  the  common  form 
for  important  undertakings  in  the  earlier  period  of  the 
law,  but  the  growing  tendency  to  disregard  forms,  coupled 
with  legislation,  has  modified  the  law  of  sealed  instru- 
ments profoundly,  and  assimilated  them  in  many  respects 
to  ordinary  simple  contracts.  Various  obligations  are 
specialties  at  common  law;  thus  covenants,  deeds,  bonds, 
are  forms  of  specialties,  since  they  refjuired  a  seal  to 
give  them  validity.  The  tenn  deed,  synonymous  with 
specialty,  is  now  confined  in  ordinary  meaning  to  sealed 
and  unsealed  conveyances  of  real  estate. 

§  63.  Seal.  Form  and  signature.  A  valid  seal  at  com- 
mon law  is  an  impression  upon  wax,  or  a  wafer,  or  some 
tenacious  substance  capable  of  being  impressed  (2).  The 
later  decisions  have  greatly  modified  this  requirement; 
thus  it  has  been  held  that  a  scroll  made  with  a  pen  with 
the  word  seal  or  L.  S.  is  sufficient,  or  an  impression  upon 
the  instrument  made  with  a  die  sufficiently  clear  to  be 
recognized  is  a  valid  seal  (3). 


(1)  Bishop.  Contracts,  Sec.  110. 

(2)  3  Coke's  Inst.  169. 

(3)  .laeksonviUe.  etc..  Railway  Co.  v.  Hooper,  160  U.  S.  514;  Pillow 
V.  Roberts.  13  How.  472. 

59 


60  CONTRACTS 

No  particular  form  of  words  is  essential  nor  is  it  nec- 
essary that  the  instrument  be  signed  by  the  parties  to  it, 
since  their  seals  and  not  their  signatures  determine  the 
validity  of  the  instrument  (4).  The  names  of  the  par- 
ties must  appear  in  the  instrument. 

i;  64.  Delivery.  Escrow.  Merely  sealinp:  does  not  j?ive 
the  instrument  biniling  force.  It  nmst  be  delivered  to 
the  party,  for  whose  benefit  it  is  made. 

Delivery  to  one  not  a  party  to  the  instrument,  to  be  de- 
livered by  him  to  the  party  entitled  on  tiie  hai>pening  of 
a  stipulated  event,  is  termed  delivery-  in  escrow,  and  the 
specialty  does  not  become  effective  until  the  happening 
of  the  condition  and  the  deliver)'  to  the  i)arty  entitled 
(5).  If  the  specialty  is  delivered  to  the  i>arty  entitled, 
although  upon  condition,  the  condition  is  void,  and  the 
specialty  is  in  full  force.  If,  however,  tlie  transaction  is 
not  one  requiring  a  seal,  a  conditional  delivery  to  the  one 
entitled  is  valid,  as  the  transaction  stands  on  the  footing 
of  a  simple  contract  (6). 

The  specialty  must  be  completely  filled  out  before  seal- 
ing and  delivery,  and  subsequent  additions  invalidate  the 
instrument,  unless  there  be  a  subsequent  re-execution  or 
anew  delivery  (7). 

§  65.  Consideration.  An  instrument  under  seal  does 
not  require  a  consideration.  The  statement  frequently 
made  that  the  seal  imports  or  implies  a  consideration  is 


(4)  Parks  v.  Hazlerigg,  7  Black.  536. 

(5)  Gilbert  v.  North  American  Ins.  Co.,  23  Wend.  43. 

(6)  Ordinary  v.  Thatcher,  41  N.  J.  L.  403;   Blewitt  v.  Boorum,  142 
N.  Y.  357. 

(7)  PoweU  V.  Duff,  3  Camp.  181;  Hudson  v.  Revett,  5  Bing.  368. 


FORMATION  OF  CONTRACTS  61 

incorrect,  since  sealed  instruments  were  recognized  at 
law  long  before  the  doctrine  of  consideration  was  devel- 
oped (8). 

In  states  where  seals  are  not  abolished  statutory  pro- 
visions are  often  found  which  provide  in  substance  that 
"a  seal  upon  an  executory  instrument  shall  be  received 
only  as  i)resumptive  evidence  of  a  sufficient  consideration, 
which  may  be  rebutted  as  if  the  instrument  were  not 
sealed."  Such  a  provision  in  effect  destroys  the  char- 
acter of  a  specialty,  since  the  seal  is  merely  presumptive 
evidence  of  a  consideration,  the  absence  of  which  may  be 
shown  to  defeat  the  obligation.  In  states  where  such  a 
statute  is  in  force,  the  courts  have  sustained  voluntary 
deeds.  Thus  where  A  executed  a  promise  under  seal  to 
pay  a  sum  of  mouey  to  B,  his  son,  the  court  sustained  the 
instrument  on  the  ground  that  the  law  was  not  intended 
to  abolish  the  distinction  between  specialties  and  simple 
contracts,  but  was  designed  to  make  the  rule  applied  by 
equity  courts  effective  in  a  law  court.  Tliey  would  dis- 
regard the  seal  and  require  a  consideration  when  it  was 
evident  the  parties  intended  a  consideration;  if  it  was 
clear  that  no  consideration  was  intended  a  sealed  obliga- 
tion would  be  enforced  (9). 

§  66.  Other  modifications  of  the  old  rules.  Various 
other  modifications  of  the  old  law  respecting  specialties 
have  been  made.  Thus  the  ancient  doctrine  that  a  spe- 
cialty could  be  destroyed  or  modified  only  by  an  instru- 
ment of  like  dignity,  i.  e.,  an  instrument  under  seal,  no 


(8)  Candor  &  Henderson's  Appeal,  27  Pa.  St.  119. 

(9)  AUer  v.  Aller,  40  N.  J.  L.  446. 


62  CONTRACTS 

longer  prevails,  and  a  specialty  can  be  rescinded  orally 
or  modified  by  a  subsequent  oral  or  written  agree- 
ment (10). 

§  67.  Disabilities  limiting  contractual  capacity.  Two 
classes  of  natural  persons  are  limited  in  their  capacity 
to  make  contracts:  1.  Those  lacking  mental  capacity,  us 
lunatics.  2.  Those  possessing  mental  wipacity  but  lacking 
legal  capacity,  ixs  infants  or  minors  and  married  women. 
The  second  class  fonnerly  embraced  a  number  of  persons 
no  longer  included,  such  as  aliens,  convicts,  imd  so  forth. 
The  abolition  of  slavery  narrowed  this  class  still  further. 
Legislation  has  greatly  moditied  the  doctrines  of  the  law 
as  applied  to  married  women.  A  third  clas«  of  limited 
contractual  capacity  consists  of  artificial  persons  created 
by  law,  such  as  corporations. 

§68.  Insane  persons  and  idiots:  English  rule.  Insane 
persons  and  idiots  are  said  to  be  liable  on  their  contracts 
for  necessaries.  Their  liability  is  not  on  the  express 
promise,  but  on  an  implied  one  for  the  fair  value  of  the 
goods  fuiTiished  or  services  rendered.  In  this  respect  the 
liability  is  the  same  as  that  of  infants.  The  English  courts 
have  gone  much  further  than  the  American  courts  in 
holding  an  insane  person  liable  on  his  contracts.  In  Im- 
perial Loan  Co.  v.  Stone  (11),  A  signed  a  note  as  surety. 
The  jury  found  that  at  the  time  he  signed  he  was  insane 
and  incapable  of  understanding  what  he  was  doing.  It 
did  not  appear  that  the  plaintiff  knew  of  A's  insanity 
at  the  time  when  A  signed  the  note.    It  was  held  that  the 


(10)  Bishop,  Contracts,  Sec.  130. 

(11)  (1892)   1  Q.  B.  699, 


FORMATION  OF  CONTRACTS  63 

plaintiff  could  recover  against  A,  the  court  saying: 
"When  a  person  enters  into  a  contract  and  afterwards 
alleges  that  he  was  so  insane  at  the  time  that  he  did  not 
know  what  he  was  doing  and  proves  the  allegation,  the 
contract  is  as  binding  on  him  in  every  respect,  whether 
it  is  executed  or  executory,  as  if  he  had  been  sane,  when 
he  made  it ;  unless  he  can  prove  further  that  the  person 
with  whom  he  contracted  knew  him  to  be  so  insane  as 
not  to  be  capable  of  understanding  what  he  was  about." 

§  69.    Same:    American  rule.    In  the  United  States  the 
courts  are   not   in   accord.     Some  decisions   apparently 
follow  the  English  rule.    The  majority  of  courts  take  the 
view  that  when  the  person  contracting  with  the  insane 
person  was  not  aware  of  the  insanity,  and  the  insane 
person  has  not  been  adjudged  insane  by  a  competent  tri- 
bunal, the  contract  will  be  earned  out  if  it  has  been  so 
far  executed  that  it  is  not  possible  to  put  the  parties  in 
their  original  i)Osition.    In  Gribben  v.  Maxwell  (12),  A,  an 
insane  person,  conveyed  land  to  B,  for  a  consideration 
paid.    Aiterwards  A  was  adjudged  insane,  and  C  being 
apointed  as  guardian,  brought  an  action  to  recover  the 
land.     It  was  held  he  could  not  recover,  since  the  con- 
tract was  executed,  and  C  did  not  tender  back  the  price 
paid.    In  this  case  it  was  apparently  possible  to  put  the 
parties  back  as  they  were  before  the  contract,  but  C  did 
not  offer  to  return  the  purchase  price  and  so  was  refused 
relief. 

§  70.    Where  insanity  is  known.    In  Crawford  v.  Sco- 

(12)     34     Kan.    8. 


64  CONTRACTS 

veil  (13)  A  conveyed  property  to  B  wliile  insane.  After 
recovering  his  reason  he  brought  the  action  to  recover 
the  property,  showing  that  B  knew  of  his  insanity  at 
the  time  of  the  sale  and  took  advantage  of  it.  It  was  held 
that  B's  conduct  was  a  fraud  on  A  and  the  relief  asked 
for  was  granted.  A  was  not  compelled  to  tender  the  price 
received. 

§  71.  When  the  contract  is  void.  Some  courts  hold 
a  deed  by  an  insane  person  to  be  void,  but  the  majority 
of  the  courts  place  deeds  on  the  same  footing  as  other 
contracts  and  voidable  merely  (14).  Where,  however,  a 
person  has  been  adjudged  insane  and  a  conservator  (trus- 
tee or  guardian)  has  been  appointed  to  manage  his 
affairs,  contracts  made  by  the  insane  person  are  held  to 
be  absolutely  void.  A  provision  to  this  effect  is  usually 
made  by  statute.  If  no  guardian  is  appointed,  or  the 
guardian  resigns,  the  insane  person's  contracts  are 
merely  voidable  (15). 

§  72.  Monomania  and  lucid  intervals.  "Where  the  in- 
sanity takes  the  form  of  monomania,  the  insanity  consist- 
ing of  delusions  on  particular  subjects,  contracts  where 
the  subject  matter  is  not  affected  by  the  monomania  are 
binding.  In  Boyce's  Admrs.  v.  Smith  (16)  A  gave  his 
bond  to  B  in  settlement  of  certain  business  obligations. 
Before  and  at  the  time  of  the  transaction  A  was  suffering 
from  religious  monomania,  but  in  other  respects  was  nor- 


(13)  94    Pa.    St.   48. 

(14)  Wilkinson  v.   Wilkinson,   129  Ala.   279;    Luhrs   v.   Hancock, 
181    U.    S.    567. 

(15)  Mohr  V.  Tulip,   40  Wis.   66. 

(16)  9   Gratt.   704. 


FORMATION  OF  CONTRACTS  65 

mal  and  attended  to  business.  It  was  held  that  A's  es- 
tate was  liable,  the  monomania  being  in  no  way  con- 
nected with  the  subject  matter  of  the  bond,  which  was 
therefore  valid. 

A  person  suffering  from  insanity  may  have  lucid  inter- 
vals, and  contracts  made  by  him  during  such  intervals 
will  be  binding.  The  burden  of  showing  that  the  promi- 
sor was  sane  at  the  time  would  be  upon  the  person  seek- 
ing to  enforce  the  contract.  Since  the  contracts  of  an  in- 
sane person  are  voidable  merely,  he  may  in  like  manner 
as  an  infant  confirm  them,  when  restored  to  reason  (17). 

The  defense  of  insanity  can  be  raised  only  by  the  insane 
person  or  his  duly  appointed  guardian  or  personal  repre- 
sentatives. 

§  73.  Drunkards.  Persons  so  far  under  the  influence 
of  liquor  as  to  be  unable  to  realize  their  acts  are  in  the 
same  condition  temporarily  as  insane  persons,  and  the 
same  general  rules  apply.  They  are  liable  for  necessaries 
furnished  in  any  event,  and  other  contracts  are  treated 
as  voidable  at  their  election.  In  Barrett  v.  Buxton  (18), 
A  and  B  entered  into  a  contract  for  the  exchange  of  cer- 
tain real  estate,  and  a  note  was  given  by  B  for  the  differ- 
ence in  value  between  the  properties  to  be  exchanged.  In 
a  suit  on  this  note  by  A,  B  alleged  that  he  was  drunk 
at  the  time  the  note  was  signed.  It  was  held  that  B  could 
set  up  his  intoxication  as  a  defence,  if  it  was  sufficient 
to  deprive  him  of  his  understanding,  even  though  the  in- 
toxication was  voluntary  and  not  procured  through  an 


(17)  AUIs  V.  Billings,  6  Met  415. 

(18)  2  Aik.    (Vt)    167. 


66  CONTRACTS 

act  of  A.  The  fact  that  he  is  ex-cited  by  liquor  is  not 
enough,  however,  provided  he  is  sufficiently  sober  to 
understand  the  business  involved  (19).  The  same  is  true 
in  the  case  of  a  person  of  feeble  intellect.  If  he  has  suf- 
ficient understanding  to  api)i*eciate  what  is  being  done 
the  transaction  will  stand.  Questions  of  this  character 
are  usually  complicated  by  evidence  of  fraud  and  undue 
influence. 

§  74.  Infants.  All  persons  under  21  years  old  are  in- 
fants or  minors  at  common  law.  Statutes  frequently  fix 
the  age  at  18  in  the  case  of  women.  In  general  an  infant's 
contracts  are  not  enforceable  against  him,  except  for  nec- 
essaries. He  may  affirm  or  avoid  them  when  he  comes 
of  age.  The  subject  of  infant's  contracts  is  fully  treated 
in  Part  IV  of  the  article  on  Domestic  Relations  and  Per- 
sons, in  Volume  II  of  this  work. 

§  75.  Majrried  women.  All  contracts  of  married  women 
were  void  at  common  law,  the  marriage  relation  de- 
priving her  of  this  power.  In  equity  she  had  certain 
powers  to  charge  her  separate  property  by  contracts. 
Modern  legislation  has  everywhere  greatly  enlarged  her 
capacity  to  contract.  The  subject  is  fully  discussed  in 
Part  II  of  the  article  on  Domestic  Relations  and  Persons, 
in  Volume  II  of  this  work. 

§  76.  Corporations.  Contracts  may  not  only  be  made 
by  natural  persons  of  legal  and  natural  capacity,  but  by 
artificial  persons  created  by  law,  and  treated  as  having 
a  distinct  personality.  The  most  conspicuous  example 
of  such  an  artificial  person  is  the  corporation.    A  corpor- 


(19)     Schouler,   Domestic   Relations,   Sec.    5. 


FORMATION  OF  CONTRACTS  67 

ation  is  really  an  aggregation  of  individuals  who  are 
treated  in  law  as  one  person  for  the  ordinary  purposes  of 
doing  business.  The  power  to  make  contracts  in  further- 
ance of  purposes  for  which  the  corporation  is  organized 
is  inherent,  and  need  not  be  expressly  granted.  Con- 
tracts for  a  purpose  beyond  the  powers  expressly  or 
impliedly  granted  to  the  corporation  are  said  to  be  ultra 
vires  or  beyond  the  powers  granted.  Considerable  dif- 
ference of  opinion  exists  as  to  how  far  ultra  vires  con- 
tracts may  be  enforced  where  they  have  been  partly  exe- 
cuted. The  subject  is  fully  discussed  in  the  article  on 
Corporations  in  Volume  VIII  of  this  work. 


CHAPTER  V. 

STATUTE  OF  FRAUDS. 

§  77.  Policy  of  the  statute.  The  law  requires  that  cer- 
tain classes  of  contracts  shall  be  proven  by  a  certain  kind 
of  evidence,  in  order  to  be  enforceable  in  a  court  of  law. 

The  purpose  of  such  a  rule  is  not  to  create  a  class  of 
formal  contracts,  but  to  protect  persons  engaged  in  busi- 
ness transactions  against  perjury  and  false  swearing. 
This  rule  of  law  had  its  origin  in  the  statute,  29  Charles 
n  (1677),  chap.  3,  sec.  4  and  sec.  17,  known  as  the  stat- 
ute of  frauds.  Most  of  this  statute  has  been  enacted  with 
slight  modifications  in  every  American  jurisdiction.  It 
does  not  prescribe  a  form  for  legal  agreements,  but 
merely  the  kind  of  evidence  that  the  court  will  receive  to 
prove  such  agreements.  If  the  agreement  has  been  fully 
carried  out,  no  question  of  its  validity  can  be  raised  (1). 
It  is  only  when  the  alleged  agreement  comes  before  the 
court  for  enforcement  that  the  statute  becomes  impor- 
tant. A  contract  may  be  perfectly  good  and  yet  not  en- 
forceable, because  the  proper  kind  of  evidence  is  lacking 
(2).  Whenever  this  evidence  is  obtained  relief  can  be 
had  on  the  contract.  Thus  if  A  makes  an  oral  contract 
with  B  that  is  within  the  statute,  he  can  not  sue  B  on  it 
unless  he  can  prove  it  by  a  memorandum,  signed  by  B, 


(1)  stone  V.  Dennison,  13  Pick.  1. 

(2)  Wald's  Pollock  Contracts  (Williston's  ed.),  748. 

6a 


FORMATION  OF  CONTRACTS         69 

showing  the  teims  of  the  contract;  but  if  he  secures  a 
memorandum  or  letter  made  at  a  later  time  in  which  B 
acknowledges  the  obligation,  A  can  recover,  since  he  now 
has  the  sort  of  evidence  required. 

§  78.  Provisions  of  the  statute.  The  parts  of  the  stat- 
ute generally  adopted  in  the  United  States  are  as  follows: 
**Sec.  IV.  No  action  shall  be  brought,  (1)  whereby  to 
charge  any  executor  or  administrator  upon  any  special 
promise  to  answer  for  damages  out  of  his  own  estate;  (2) 
or  whereby  to  charge  the  defendant  upon  any  special 
promise  to  answer  for  the  debt,  default,  or  miscarriage 
of  another  person;  (3)  or  to  charge  any  person  upon 
any    agreement    made    in    consideration    of    marriage; 

(4)  or  upon  any  contract  or  sale  of  land,  tenements, 
or  hereditaments,  or  any  interest  in  or  concerning  them; 

(5)  or  upon  any  agreement  that  is  not  to  be  performed 
within  the  space  of  one  year  from  the  making  thereof; 
unless  the  agreement  upon  which  such  action  shall  be 
brought,  or  some  memorandum  or  note  thereof  shall  be  in 
writing  and  signed  by  the  party  to  be  charged  therewith, 
or  some  other  person  thereunto  by  him  lawfully  au- 
thorized. 

*'Sec.  XVII.  Be  it  further  enacted  ....  that 
no  contract  for  the  sale  of  any  goods,  wares  and  mer- 
chandises for  the  price  of  £10  sterling  or  upwards 
[amount  varies  in  American  statutes]  shall  be  allowed 
to  be  good  except  the  buyer  shall  accept  part  of  the  goods 
so  sold,  and  actually  receive  the  same,  or  give  something 
in  earnest  to  bind  the  bargain,  or  in  part  of  payment;  or 
that  some  note  or  memorandum  in  writing  of  the  said 
bargain  be  made  and  signed  by  the  parties  to  be  charged 

Vol.  I— 10 


70  CONTKACTS 

by  such  contract  or  their  agents  thereunto  lawfully  au- 
thorized. ' ' 
In  several  states,  as  Illinois,  this  section  is  not  in  force. 

§  79.  Special  promise  by  executor  or  administrator  to 
pay  out  of  his  own  estate.  An  executor  or  administrator 
is  not  personally  liable  upon  claims  against  the  estate. 
His  duty  is  to  administer  the  funds  that  come  to  him  as 
executor,  and  to  pay  debts  and  legacies  as  far  as  possible 
out  of  the  assets.  If  he  promises  to  pay  a  claim  against 
the  estate,  it  will  not  bind  him  personally,  unless  he  clear- 
ly indicates  that  his  promise  is  personal.  Even  then  it 
is  not  binding  unless  the  promisee  has  given  a  considera- 
tion, and  the  agreement  is  evidenced  by  a  writing  signed 
by  him  or  his  agent,  as  required  by  the  statute  of  frauds- 
The  promise  must  be  to  pay  a  claim  made  against  the 
estate.  In  Bellows  v.  Sowles  (3),  the  executor  of  B's  es- 
tate promised  to  pay  C,  an  heir  of  B,  a  sum  of  money  if 
he  would  not  contest  the  will.  This  promise  was  not  to 
pay  a  claim  against  the  estate,  or  in  settlement  of  one, 
but  merely  to  protect  the  private  interests  of  A.  Hence 
the  statute  does  not  apply. 

§  80.  Promise  to  answer  for  the  debt,  default,  or  mis- 
carriage of  another.  The  only  class  of  cases  that  comes 
within  this  clause  of  the  statute  are  those  where  there 
is  a  promise  to  pay  a  subsisting  obligation  between  the 
promisee  and  a  third  person,  if  the  third  person  fails  to 
pay.  Thus  A  is  requested  to  sell  goods  to  B.  C  says  to 
A,  ''Sell  goods  to  B  and  if  he  does  not  pay  for  them,  I 
will."    This  is  a  typical  case  coming  within  the  statute. 


(3)     57  Vt.  164. 


FORMATION  OF  CONTRACTS         71 

This  provision  of  the  statute  is  discussed  in  the  article 
on  Suretyship,  Chapter  I,  in  Volume  VII  of  this  work. 

§  81.  Agreements  in  consideration  of  marriage.  This 
clause  does  not  apply  to  mutual  promises  to  marry  but 
to  promises  to  make  a  settlement  of  property  or  to  pay 
money  in  consideration  of  marriage.  Thus  a  promise  by 
a  man  to  settle  certain  property  upon  or  pay  a  sum  of 
money  to  a  woman  in  return  for  her  promise  to  marry  or 
for  actual  marriage  is  within  the  statute. 

§  82.    Contracts  for  the  sale  of  land,  tenements,  etc. 
''This  clause  applies  to  all  contracts  affecting  in  any  way 
the  title  to  any  kind  of  interest  in  any  kind  of  real  prop- 
erty, except  leases,  which  are  governed  by  other  sections 
of  the  statute"  (4).   Contracts  which  are  preliminary  to 
the  acquisition  of  an  interest  or  such  as  deal  with  a  re- 
mote interest  are  not  within  the  statute,  such  as  agree- 
ments to  pay  for  the  investigation  of  a  title  to  land  or  to 
sell  land  to  a  purchaser  that  a  land  agent  shall  find  (5). 
Partnership  agreements  to  deal  in  lands  are  not  within 
the  statute.    Otherwise,  where  the  parties  agree  to  trans- 
fer specific  lands  to  the  firm  (6).    Growing  annual  crops, 
called  emblements  or  fructus  industriales,  are  treated  for 
most  purposes  as  chattel  interests  or  personalty.     The 
rule  is  otherwise  in  the  case  of  natural  products,  called 
fructus  naturales,  such  as  timber,  grass,  etc.     Thus,  a 
contract  by  A  to  sell  the  standing  trees  on  his  land,  is  a 
sale  of  an  interest  in  land.    If,  however,  the  title  to  the 


(4)  Harriman,  Contracts  (2  ed.),  Sec.  584. 

(5)  Heyn  v.  Philips,  37  Cal.  529. 

(6)  Goldstein  v.  Nathan,  158  111.  641. 


72  CONTRACTS 

trees  is  not  to  pass  to  the  purchaser  until  after  they  are 
severed  from  the  land,  as  where  A  is  to  cut  the  trees  and 
B  is  to  take  them  as  felled,  the  contract  is  for  the  sale  of 
personal  property.  See  Sales,  §  18,  in  Volume  III  of  this 
work. 

Courts  of  equity  have  permitted  certain  acts  in  con- 
nection with  oral  contracts  for  land  to  take  the  place  of 
a  writing.  Taking  possession  of  land  and  paying  for  it, 
for  instance,  will  enable  one  to  obtain  a  deed  for  it  under 
an  oral  contract.  This  is  fully  discussed  in  the  article  on 
Equity,  §§  39-42,  in  Volume  VI  of  this  work. 

§  83.  Agreements  not  to  be  performed  within  the  space 
of  a  year.  This  clause  has  been  so  construed  that  con- 
tracts that  by  any  possibility  can  be  performed  within 
a  year  are  not  within  its  terms.  Thus  in  Warner  v.  Texas 
&  Pacific  Railway  Co.  (7)  the  company  orally  agreed  to 
put  in  a  switch  opposite  A's  mill  provided  that  he  would 
furnish  the  ties  and  grade  the  ground,  the  company  to 
put  down  the  rails  and  maintain  the  switch  as  long  as  A 
needed  it.  It  was  held  that  the  contract  was  not  within 
the  statute,  since  the  contract  might  have  been  performed 
within  a  year.  It  is  immaterial  that  the  time  of  per- 
formance is  uncertain  and  may  be  extended  and,  as  a 
matter  of  fact,  is  extended  beyond  a  year.  If  on  the  other 
hand  the  agreement  had  been  that  the  switch  would  be 
maintained  for  a  period  beyond  one  year,  the  statute 
would  apply. 

§  84.  Same:  Performance  contingent  on  an  uncertain 
event.    If  the  performance  of  the  contract  is  contingent 


(7)     164  u.  S.  418. 


FORMATION  OF  CONTRACTS  73 

on  an  event  that  may  occur  within  a  year,  the  statute  does 
not  apply.  Thus  in  Peters  v.  Westborough  (8),  A  orally 
contracted  to  support  B  until  she  was  eighteen  years  of 
age.  It  was  held  that,  since  this  contract  would  be  termi- 
nated by  the  death  of  B,  which  might  occur  within  a 
year,  the  contract  was  enforceable.  When  the  promises 
on  one  side  can  be  performed  within  a  year,  but  the  other 
side  can  not,  the  cases  are  in  conflict.  Thus  in  Marcy  v. 
Marcy  (9),  A,  in  consideration  of  a  farm  then  conveyed 
to  him,  promised  to  pay  B  $500  when  B  reached  the  age 
of  twenty-one.  The  contract  was  held  to  be  within  the 
statute,  since  A's  promise  could  not  be  performed  within 
a  year.  A  different  result  was  reached  on  similar  facts  in 
Piper  V.  Fosher  (10)  on  the  gi'ound  that  since  perform- 
ance was  complete  on  one  side,  it  would  be  a  fraud  on  the 
party  who  has  perfonned  to  allow  the  statute  to  be 
pleaded.  On  the  strict  language  of  the  statute,  the  view 
in  Marcy  v.  Marcy  seems  the  correct  one. 

A  distinction  must  be  drawn  between  contracts  that 
may  be  performed  within  a  year,  and  contracts  for  a 
longer  period,  which  can  not  be  so  performed  but  in 
which  performance  may  be  excused  by  reason  of  the  im- 
possibility of  performance.  Thus  in  Peters  v.  West- 
borough  (8),  where  the  contract  was  to  support  B  until  she 
reached  a  certain  age,  the  contract  might  be  performed 
within  a  year  if  B  died,  since  the  contract  is  to  support  B 
for  the  period  named  if  she  lived  so  long.  If,  on  the  other 
hand,  A  had  orally  agreed  to  hire  B  for  three  years,  and 


(8)  19  Pick.  364. 

(9)  9  Allen  8. 

(10)  121  Ind.  407. 


74  CONTRACTS 

B  had  agreed  to  serve,  the  death  of  A  or  B  which  might 
occur  within  a  year  would  terminate  all  liability  under 
the  contract,  by  reason  of  the  impossibility  of  perform- 
ance, but  the  contract  would  not  be  performed— simply 
its  non-performance  excused.  Thus  the  second  case  would 
be  within  the  statute,  while  the  first  case  would  not  (11). 

§  85.  Contracts  for  the  sale  of  goods,  wares,  and 
merchandise.  This  provision,  taken  from  the  seventeenth 
section  of  the  statute  of  frauds  is  fully  treated  in  Chapter 
II  of  the  article  on  Sales  in  Volume  III  of  this  work. 
Goods,  wares,  and  merchandise  include  all  tangible  per- 
sonal property.  Such  intangible  interests  as  shares  of 
stock  are  not  within  the  statute  under  the  English  decis- 
ions. The  American  courts  generally  hold  sales  of  shares 
of  stock  are  within  the  statute,  since  stock  is  a  common 
subject  matter  of  sale. 

§  86.  The  memorandum.  Where  the  contract  is  within 
the  statute  ,  it  must  be  evidenced  by  a  note  or  memoran- 
dum signed  by  the  party  to  be  charged  therewith  or  his 
duly  authorized  agent.  The  term  used,  note  or  memoran- 
dum, indicates  that  a  formal  written  agreement  is  not  es- 
sential. The  purpose  of  the  statute  is  to  protect  the 
promisor  against  false  claims  and  therefore  any  writing 
which  discloses  the  terms  of  the  agreement,  the  parties 
thereto,  and  signed  by  the  person  against  whom  the  suit 
is  brought  is  sufficient.  What  constitutes  a  sufficient 
memorandum  is  discussed  in  the  above  mentioned  article 
on  Sales,  §§25-28- 


(11)     Shute  V.  Dorr,  5  Wend.  204. 


PART  II. 

OPERATION  OF  CONTRACTS. 

CHAPTER  VI. 

JOINT  AND  SEVERAL  CONTRACTS.  ALTERNATIVE 
CONTRACTS. 

§  87.    Joint  or  several  liabiUty.    Any  number  of  per- 
sons may  be  parties  to  an  agreement.    Where  more  than 
two  are  parties,  their  rights  under  it  either  as  promisors 
or  promisees  will  be  determined  by  the  construction  of 
the  instrument.    The  parties  may  intend  a  joint  liability 
or  right,  or  a  several  liability.    Usually  the  language  of 
the  instrument  will  disclose  the  kind  of  obligation  m- 
tended.  -Thus  a  note  beginning  "We  promise  to  pay," 
signed  by  A,  B  &  C  would  be  a  joint  obligation.    If  it  be- 
gins, "I  promise  to  pay"  and  is  signed  as  before,  it 
would  be  joint  and  several  (1).    Where  the  language  of 
the  obligation  is  not  clear,  the  court  will  consider  the  na- 
ture of  the  agreement,  and  who  received  the  considera- 
tion;  if  all  received  it,  the  contract  is  joint.    Where  two 
or  more  are  parties  to  a  promise,  the  presumption  is  that 
it  is  joint,  although  this  presumption  may  be  rebutted. 
The  rule  of  construction  has  been  modified  by  statute  m 
many  states,  so  that  the  presumption  is  the  other  way, 
i.  e.,  that  an  obligation  is  joint  and  several,  miless  affirma- 

(1)     Barnettv.  Juday,  38  Ind.  86;  Hemmenway  v.  Stone.  7  Mass.  58. 

\ 


V 


76  CONTRACTS 

tively  sliown  to  be  joint.  In  many  states,  the  statutes  de- 
clare joint  obligations  to  be  joint  and  several. 

§  88.  Joint  contracts.  In  a  joint  contract  the  obliga- 
tion is  entire.  Thus  where  A,  B  &  C  are  jointly  liable  to 
X,  there  is  but  one  cause  of  action  against  A,  B  &  C. 
They  are  really  conceived  of  as  forming  a  distinct  group 
or  entity  apart  from  the  individual  members  of  the  group. 

If  X  releases  A,  the  result  is  that  B  &  C  are  also  re- 
leased, since  there  is  but  one  obligation  (2).  X  can  re- 
lease A  from  the  obligation  in  another  way,  however.  He 
may  promise  A  for  a  consideration  not  to  sue  him.  This 
will  not  destroy  the  obligation,  and  X  can  sue  all  the  par- 
ties, but,  when  his  judgment  is  obtained,  he  must  refrain 
from  satisfying  it  by  seizing  A's  goods.  The  courts  are 
disposed  to  treat  releases,  if  possible,  as  promises  not  to 
sue,  thus  saving  the  creditors'  rights  against  the  other 
parties  (3).  By  statute  in  many  states,  a  release  of  one 
will  not  release  the  others. 

§  89.  Survivorship.  Another  incident  of  joint  obliga- 
tions and  rights  is  survivorship.  Thus  if  A  and  B  are 
jointly  liable  to  X,  and  A  dies,  X's  only  right  at  law  is 
against  the  survivor  B.  If  B  then  dies,  X's  right  would 
be  against  B's  executor  (4).  The  doctrine  of  survivor- 
ship has  generally  been  modified  by  statute,  so  that  the 
estates  of  deceased  joint  obligors  are  bound. 

§  90.  Joint  and  several  obligations.  Wliere  the  obli- 
gation is  joint  and  several,  the  creditor  must  sue  all  the 
debtors  in  one  action,  or  pursue  each  in  a  separate  action. 


(2)  Cysbom  V.  Martha's  Vineyard  Ry.  Co.,  140  Mass.  54&. 

(3)  Owen  v.  Homan,  4  H.  L..  Cas.  997,  1037. 

(4)  Richards  v.  Heather,  1  Barn.  &  Aid.  29. 


OPERATION  OF  CONTRACTS  77 

Thus  A  has  a  claim  against  X,  Y,  and  Z.  He  may  join 
them  in  one  action,  or  sue  any  or  all  of  them  separately, 
but  he  can  not  sue  X  in  a  separate  action,  and  Y  and  Z 
in  a  joint  action  (5).  This  rule  has  also  been  modified  in 
a  number  of  states  by  statute. 

The  courts  are  not  in  accord  as  to  whether  a  creditor 
who  has  obtained  a  joint  judgment  against  all  can  after- 
wards sue  each  separately.  The  courts  that  deny  such  a 
right  do  so  on  the  ground  that  the  creditor  has  elected 
to  proceed  jointly,  and  therefore  can  not  now  sue  severally 
(6) .  On  the  other  hand,  it  is  said  that  as  long  as  the  cred- 
itor has  not  been  paid  he  can  proceed  against  each  debtor 
severally  (7).  The  latter  view  treats  the  creditor  as  hav- 
ing a  joint  claim  against  all,  and  an  individual  claim 
against  each  debtor. 

With  respect  to  joint  and  several  obligations,  the  law  of 
survivorship  does  not  apply,  and  the  estate  of  the  de- 
ceased debtor  will  be  liable.  The  relief  against  the  estate 
must  be  had  in  a  separate  proceeding,  as  by  filing  a  claim 
against  the  estate;  the  executor  of  the  deceased  can  not 
be  joined  as  a  party  to  a  suit  with  the  surviving  obligors 
(8)  since  the  two  claims  are  not  of  the  same  nature. 

Where  the  creditors  are  joint,  the  same  rules  apply  as 
in  the  case  of  joint  debtors,  but  obligations  of  this  charac- 
ter can  not  be  joint  and  several,  although  they  may  be 
joint  or  several.  Thus  A  &  B  jointly  entitled  to  a  claim 
against  C  must  both  join  in  the  action.    If  the  agreement 


(5)  State  of  Maine  v.  Chandler,  79  Me.  172. 

(6)  United  States  v.  Price,  9  How.  83. 

(7)  Moore  v.  Rogers,  19  111.  347. 

(8)  May  v.  Hanson,  6  Cal.  643. 


78  CONTRACTS 

is  expressed  to  be  joint  or  several,  A  and  B  can  sue  to- 
gether, or  A  or  B  can  sue  C  separately,  but  they  cannot 
sue  jointly  and  separately  also,  as  is  the  case  where  the 
obligors  are  jointly  and  severally  liable  (9). 

§  91.  Contracts  performable  in  the  alternative.  Where 
an  agreement  is  in  such  a  fomi  that  the  promisor  can 
satisfy  his  promise  by  doing  either  one  of  two  acts,  the 
contract  is  said  to  be  in  the  alternative.  Ordinarily  the 
one  who  has  promised  to  do  the  acts  has  a  right  to  decide 
or  elect  which  act  he  will  do.  Thus,  in  Plowman  et  al.  v. 
Riddle  (10),  A  gave  his  note  to  B  for  $500;  the  note  pro- 
vided that  it  might  be  paid  in  good  leather  of  a  certain 
description,  and  at  stipulated  prices.  It  was  held  that  A 
had  a  right  to  elect  which  he  would  do,  at  or  before  the 
note  was  due,  and  his  failure  to  make  such  an  election 
gave  B  the  right  to  sue  for  the  money. 

The  rule  that  the  one  who  is  to  perform  the  acts  has  the 
right  to  elect  is  not  applied  where  the  circumstances  indi- 
cate that  a  different  rule  was  intended.  In  Norton  v. 
^Webb  (11)  A  conveyed  a  farm  to  B,  upon  a  promise  by  B 
to  support  A  and  his  wife  during  their  lives  in  their  house 
on  the  lot  if  they  so  chose.  In  an  action  to  recover  the 
land  because  of  B's  failure  to  support,  it  was  urged  by  B 
that  he  was  only  bound  to  support  A  on  the  farm,  but  the 
court  held  that  since  the  agreement  was  for  the  comfort 
of  A  and  wife,  they  would  be  allowed  to  elect  where  they 
would  receive  the  support,  provided  the  place  selected  did 
not  involve  B  in  unreasonable  expense.    In  Thorn  v.  City 


(9)  Eudith  V.  Vallentine,  63  Me.  97. 

(10)  7  Ala.  775. 

(11)  36   Me.    270. 


OPERATIOX  OF  CONTRACTS  79 

Rice  Mills  (12),  A  was  the  holder  of  bonds  in  the  R.  Co., 
interest  on  which  was  payable  at  the  X  bank  or  the  offices 
of  the  company.  It  was  held  that  it  was  the  duty  of  A 
to  notify  the  R.  Co.  at  which  place  he  would  receive  the 
interest,  and  until  he  did  so,  the  R.  Co.  could  not  be  in  de- 
fault, since  they  could  not  be  in  both  places  on  the  day  the 
interest  fell  due. 

Where  the  alternative  acts  are  to  be  done  at  different 
times,  a  failure  to  do  the  act  first  in  order  of  time  will  be 
an  election  to  do  the  second.  In  Price  v.  Nixon  (13),  the 
question  was  whether  A  was  in  default  on  a  debt.  A  had 
purchased  goods  of  B  on  credit,  B  stating  the  credit  would 
be  six  or  nine  months.  After  the  six  months  had  elapsed 
and  A  did  not  pay,  this  action  was  commenced.  It  was 
held  that  A  was  not  liable  since  his  failure  to  pay  in  six 
months  was  an  election  to  adopt  the  alternative  of  nine 
months,  and  consequently  the  credit  had  not  expired  at 
the  time  the  action  was  begun. 

Where  one  of  the  alternative  performances  becomes  im- 
possible, the  promisor  is  nevertheless  bound  to  perform 
the  other  act.  In  Drake  v.  White  (14)  A  was  indebted  to 
B  by  note;  as  security  he  delivered  an  iron  safe  to  B,  re- 
ceiving the  following  memorandum  of  agreement:  *' Re- 
ceived of  A  one  safe  which  we  promise  to  redeliver  to  A 
or  its  value  in  money  on  the  payment  of  a  note  signed  by 
A."  The  safe  was  destroyed  by  fire  without  the  fault  of 
B.    Held,  he  was  liable  for  its  value  under  the  alternative 


(12)  40  Chan.  D.  357. 

(13)  5    Taunt.    338. 

(14)  117  Mass.  10. 


80  CONTRACTS 

promise.  The  result  would  have  been  otherwise  if  the 
safe  had  merely  been  delivered  to  B  as  security  for  the 
note,  since  he  would  only  then  have  been  bound  to  exer- 
cise ordinary  care  in  its  custody. 


CHAPTER  Vn. 

RIGHTS  AND   LIABILITIES   OF   THIRD   PERSONS. 

Section  1.     Kight  of  a  Beneficiaey  under  a  Conteact 
TO  Which  He  Is  Not  a  Pakty. 

§  92.  General  doctrine.  Lawrence  v.  Fox.  At  com- 
mon law  a  person  who  was  not  a  party  to  an  agreement 
could  have  no  rights  under  it,  even  though  the  agreement 
was  made  for  the  benefit  of  that  person.  The  reason 
given  was  that  the  promisor  had  made  no  promise  to  the 
third  party  and  the  third  party  had  given  no  considera- 
tion to  the  promisor  for  the  promise.  To  subject  the 
promisor  to  such  a  liability  would  result  in  making  him 
liable  in  two  actions  when  in  fact  he  had  agreed  to  be 
liable  in  one  only  (1).  An  apparent  exception  to  this  rule 
was  made  in  cases  where  there  was  privity  of  blood,  so 
called,  between  the  parties,  that  is,  where  the  relationship 
between  the  promisee  and  the  one  to  be  benefited  was  so 
close  that  in  contemplation  of  law  the  third  party  was  a 
party  to  the  agreement.  Thus,  if  A  made  a  contract  with 
B  in  which  B  promised  to  pay  a  certain  sum  to  X,  the  son 
of  A,  X  was  permitted  to  enforce  the  agreement  on  the 
above  theory  (2).  The  later  English  cases  deny  even  this 
exception  (3),  and  permit  only  marriage  settlement  con- 


(1)  Price  V.  Easton,  4  Barn.  &  Adol.  433. 

(2)  Button   V.   Poole,   2   Lev,   211. 

(3)  Tweddle  v.  Atkinson,  1  B.  &  S.  393. 

81 


82  CONTRACTS 

tracts  to  be  enforced  by  beneficiaries  who  are  not  parties 
to  the  contract.  The  American  courts  have  generally  de- 
parted from  the  common  law  rule,  and  permit  the  third 
party  to  sue  on  the  agreement  whenever  it  appears  that 
the  contract  was  made  for  his  benefit.  In  Lawrence  v. 
Fox  (4),  A  loaned  a  sum  of  money  to  B  in  consideration 
of  which  B  agreed  to  pay  the  same  amount  on  a  future 
day  to  C,  a  creditor  of  A.  C  was  allowed  to  recover  on 
the  contract  on  the  theory  that  the  contract  was  made  for 
his  benefit.  In  this  case  there  was  no  blood  relationship 
between  the  parties.  The  court  announced  as  a  general 
principle  that  a  person  for  whose  benefit  a  contract  is 
made  can  sue  upon  it  and  that  the  case  of  Dutton  v.  Poole 
(2)  was  merely  an  illustration  of  the  general  rule.  This 
decision  has  been  followed  in  the  majority  of  states  with 
some  modification. 

§  93.  Must  benefit  to  third  person  be  intended?  The 
difficult  point  to  detennine  in  each  instance  is  when  the 
contract  is  intended  for  the  benefit  of  a  third  person. 
The  question  arises  in  two  forms.  A  makes  a  contract 
with  B  by  which  B  promises  to  pay  a  certain  sum  or  to  do 
a  certain  act  for  C;  or  A  may  be  indebted  to  B  and  make  a 
contract  with  C  by  which  the  latter  promises  to  pay  A's 
debt  to  B.  In  the  first  case  the  object  of  A  is  to  confer  a 
benefit  on  C,  and  in  the  second  case  his  object  is  to  dis- 
charge a  debt  which  he  owed  to  B.  Strictly  speaking  the 
first  case  would  be  an  illustration  of  a  contract  for  the 
benefit  of  a  third  person,  since  the  sole  object  of  the  agree- 
ment was  to  benefit  C;  whereas  in  the  second  case  it  is 

(4)     20  N.  Y.  268. 


OPERATION  OF  CONTRACTS  83 

apparent  that  the  primary  object  of  A  was  to  discharge 
his  debt  to  B,  though  the  result  of  the  agreement  was  to 
confer  a  benefit  on  B.  The  courts,  however,  have  failed 
to  observe  this  distinction,  and  have  permitted  the  bene- 
ficiary to  recover  whether  the  purpose  of  the  agreement 
was  solely  to  confer  a  benefit  or  whether  its  primary  ob- 
ject was  to  discharge  an  obligation.  The  most  common 
example  of  the  latter  type  of  cases  is  where  A  mortgages 
his  property  to  B.  He  afterwards  sells  the  mortgaged 
premises  to  C  who,  as  part  of  the  purchase  price,  agrees 
to  assume  the  mortgage.  B  is  generally  permitted  to  sue 
on  this  undertaking  (5). 

§  94.  Mere  incidental  benefit  insufficient.  It  must  be 
clear  that  the  object  of  the  parties  was  to  benefit  the  third 
person  directly.  A  mere  incidental  benefit  will  not  entitle 
him  to  recover.  Thus  in  Davis  v.  Clinton  Water  Works 
(6),  the  water  works  company  entered  into  a  contract 
with  the  city  of  Clinton,  by  the  terms  of  which  they 
agreed  to  supply  water  to  the  city  for  public  purposes  in- 
cluding the  extinguishment  of  fires,  for  certain  compensa- 
tion to  be  paid  by  the  city.  A  was  a  resident  of  Clinton 
and  his  house  was  destroyed  by  fire,  the  loss  being  oc- 
casioned by  the  failure  of  the  water  works  company  to 
supply  the  water  as  agreed  in  the  contract.  It  was  held 
that  he  could  not  recover  since  the  contract  was  obviously 
not  made  for  his  benefit.  The  city  was  under  no  duty  to 
supply  water  and  the  contract  on  the  terms  indicated 
could  not  be  regarded  as  for  the  benefit  of  any  citizen.    A 


(5)  Bay  v.  Williams,  112  111.  91. 

(6)  54  la.  59. 


84  CONTRACTS 

different  result  might  be  reached,  however,  if  it  appeared 
that  the  city  was  under  duty  to  perform  the  act  in  ques- 
tion and  had  taken  a  bond  to  secure  the  performance. 

§  95.  Limitations  upon  Lawrence  v.  Fox  in  New  York. 
The  New  York  courts  have  in  later  decisions  considerably 
modified  the  scope  of  the  rule  laid  down  in  Lawrence  v. 
Fox  (4),  above.  The  limitations  put  upon  the  doctrine 
are  largely  arbitrary.  Thus,  in  the  case  of  Vrooman  v. 
Turner  (7),  the  court  held,  where  A  sold  mortgaged  prop- 
erty to  B  receiving  as  part  of  the  consideration  a  cove- 
nant by  B  to  pay  the  mortgage  debt,  that  the  mortgagee 
could  not  recover,  since  it  did  not  appear  that  A  was 
under  any  obligation  to  pay  the  debt  himself,  and  unless 
there  was  some  privity  between  the  one  to  whom  the 
promise  was  made  and  the  person  to  be  benefited,  no  re- 
covery could  be  had.  In  Durnherr  v.  Eau  (8),  it  was  held 
that  a  promise  by  A  to  B  to  protect  the  dower  right  of 
B's  wife  in  certain  property  was  not  enforceable  by  the 
wife,  since  B  was  under  no  legal  obligation  to  protect  the 
wife's  dower.  The  apparent  result  of  the  New  York 
cases  is  to  hold  agreements  unenforceable  by  third  per- 
sons, unless  the  promisee  was  under  a  duty  to  provide  for 
the  third  person  and  the  particular  contract  is  in  further- 
ance of  that  duty.  The  limitations  above  indicated  are 
largely  confined  to  the  New  York  courts  and  the  great 
majority  of  the  courts  that  allow  a  third  party  to  sue  on  a 
contract  refuse  to  recognize  them  (9). 

§  96.    Rescission  by  the  parties  to  the  contract.    After 


(7)  69  N.  Y.  280. 

(8)  135  N.  Y.  219. 

(9)  Tweeddale  v.  Tweeddale,  116  Wis.  517. 


OPERATION  OP  CONTRACTS  85 

the  contract  is  once  made,  the  question  arises  whether  or 
not  the  original  parties  to  it  may  by  agreement  rescind  the 
same  without  the  consent  of  the  third  person.  In  some 
jurisdictions  this  is  permitted,  provided  the  third  person 
has  not  changed  his  position  in  reliance  upon  the  con- 
tract (10).  The  majority  of  courts,  however,  hold  that 
after  the  right  of  the  third  party  once  arises  it  can  not  be 
destroyed  without  his  consent,  and  it  would  seem  to  be 
immaterial  whether  he  had  changed  his  position  or 
not  (11). 

§  97.  Defences  to  suit  by  third  party.  When  a  third 
party  sues  upon  the  contract,  any  defence  which  the 
promisor  might  have  used  against  the  promisee  at  the 
time  the  contract  arose  may  be  used  against  the  bene- 
ficiary. Thus  where  A  obtains  a  promise  from  B  to  pay  a 
sum  of  money  to  C,  if  B's  promise  was  induced  by  the 
fraud  of  A,  that  fact  can  be  set  up  as  a  defense  by  B  when 
action  is  brought  against  him  by  C  (12). 

§  98.  Election  of  remedies.  The  question  is  also  pre- 
sented whether  or  not  the  beneficiary  who  is  a  creditor  of 
the  promisee  is  bound  to  elect  whether  he  will  sue  on  the 
original  debt  or  sue  the  promisor  in  the  second  contract. 
Thus,  for  example,  if  A  is  indebted  to  B  and  makes  a  con- 
tract with  C  to  pay  the  debt,  is  B  bound  to  elect  whether 
he  will  sue  A  on  the  original  debt  or  C  imder  the  new 
contract?  The  better  view,  sanctioned  by  the  majority  of 
courts,  holds  that  he  is  not.  The  two  remedies  are  not 
inconsistent  and  so  long  as  B  has  not  recovered  the  full 


(10)  Wheat  V.  Rice,  97  N.  Y.  296. 

(11)  Bay  V.  Williams,  112  111.  91. 

(12)  Wald's   Pollock,   Contracts    (Williston's   ed.),   271. 


Vol  I— 11 


86  CONTRACTS 

amount  of  his  debt  in  one  suit,  he  ought  to  be  allowed  to 
sue  the  other  party  on  the  promise  (13). 

§  99.  Real  party  in  interest.  In  many  jurisdictions, 
the  statutes  provide  that  all  actions  shall  be  brought  in 
the  name  of  the  real  party  in  interest.  It  has  been  held 
that  these  statutes  confer  upon  the  beneficiary  to  a  con- 
tract the  right  to  sue.  This  view,  however,  is  not  gen- 
erally adopted,  the  courts  holding  that  the  statute  is  not 
intended  to  determine  rights  between  parties,  but  merely 
to  indicate  what  parties  must  bring  the  action  when  the 
rights  are  once  determined.  Accordingly,  if  A  has  prom- 
ised B  to  pay  C,  C  can  not  recover  merely  by  reason  of 
this  statute,  but  by  reason  of  the  fact  that  there  is  a  con- 
tract made  for  his  express  benefit. 

§  100.  Proper  basis  of  the  rule.  The  rule  permitting 
the  third  party  to  sue  upon  the  contract  is  obviously  an 
exception  to  the  ordinary  legal  rule,  and  is  based  upon  the 
theory  that  inasmuch  as  the  debtor  has  entered  into  a  con- 
tract which,  if  realized  upon,  will  result  in  assets  which 
would  be  available  for  the  payment  of  his  debts,  the 
creditor  will  be  permitted  to  proceed  directly  on  this  obli- 
gation in  an  action  at  law.  Thus,  if  A  is  indebted  to  B, 
and  makes  a  contract  with  C  to  pay  the  debt,  it  is  obvious 
that  the  claim  against  C  is  a  property  right  which  is  like 
any  other  asset  of  A.  Therefore  if  A  is  insolvent,  this 
claim  ought  to  be  realized  upon  for  the  benefit  of  B,  but 
as  long  as  A  has  sufficient  property  to  pay  B,  without  re- 
sorting to  this  claim,  there  is  no  occasion  to  give  B  this 
right  (14).    Yet  this  limitation  is  not  observed  by  the 


(13)  Barnes  v.  Hekla  Fire  Insurance  Co.,  56  Minn.  38. 

(14)  Wald's  Pollock,  Contracts   (WiUistoii's  ttd.).,  242. 


OPERATION  OF  CONTRACTS  87 

courts  in  the  United  States  except  those  that  deny  the 
third  person's  right  to  sue  at  law. 

Section  2.    Assignment  of  Contbacts. 
§  101.    General  doctrine.    Under  the  earlier  law,  a  con- 
tract was  regarded  as  creating  a  personal  relationship, 
and  therefore  one  party  to  it  could  not  assign  or  transfer 
his  rights  to  a  third  person  without  the  consent  of  the 
other  parties  to  the  contract.    It  was  also  urged  as  an 
additional  reason  for  not  permitting  assignments  that  it 
would  tend  to  stir  up  litigation,  which  was  agamst  the 
policy  of  the  law.    The  equity  courts  recognized  that  in 
certain  classes  of  contracts  a  person  could  transfer  his 
right  to  the  benefits  under  the  contract  to  a  third  person. 
The  modern  rule  substantially  adopts  the  equity  doctrine 
and  recognizes  that  the  benefits  under  certain  classes  ot 
contracts  may  be  assigned,  and  such  transfers  are  ordi- 
narily known  as  equitable  assignments,  because  they  first 
originated  as  a  doctrine  of  the  equity  courts;  but  the  term 
equitable  assignment  has  no  particular  significance  today, 
since  the  courts  of  law  will  enforce  them  as  readily  as  the 

courts  of  equity.  .-,     .     p    ^ 

1102  Suit  in  name  of  assignor.  The  method  of  en- 
forcing his  rights  by  the  assignee  varies  in  different  3uris- 
dictions  Unless  modified  by  statute,  the  assignee  must 
sue  in  the  name  of  his  assignor  (1).  By  assigning  his 
rights  under  the  contract,  the  assignor  is  held  to  have  con- 
ferred  upon  the  assignee  a  power  of  attorney  to  sue  m  the 
assignor's  name.  In  some  jurisdictions,  however,  this  rule 

(1)     Glenn  v.  Marbury,  145  U.  S.  499. 


88  CONTRACTS 

has  been  modified  by  statute  so  that  the  assignee  may  sue 
in  his  own  name  (2).  Without  regard  to  the  form  in 
which  the  action  must  be  brought,  the  substantial  right 
obtained  by  the  assignee  as  a  result  of  the  assignment  is  a 
power  of  attorney,  which  enables  him  to  take  advantage 
of  such  rights  and  such  only  as  the  assignor  enjoyed  un- 
der the  contract, 

§  103.  What  claims  are  assignable.  All  courts  agree 
that  mere  money  demands  may  be  assigned  without  ques- 
tion. Thus  where  A  is  indebted  to  B  for  a  sum  of  money, 
B  may  assign  the  claim  to  C,  who  can  recover  it  either  in 
the  name  of  B  or  in  his  own  name,  depending  on  the  par- 
ticular rule  of  procedure  enforced.  Where  the  claim 
sought  to  be  assigned  involves  further  duties  on  the  part 
of  the  assignor,  as  for  example  where  A  has  agreed  to  sell 
goods  to  B  and  B  has  agreed  to  pay  a  certain  sum  there- 
for at  a  future  day,  if  B  assigns  his  claim  to  C,  the  ques- 
tion arises  whether  he  can  transfer  to  C,  without  the  con- 
sent of  A,  the  liability  as  well  as  the  benefits  of  the  con- 
tract. It  is  generally  held  that  he  can  not  do  so  (3).  The 
assignor  still  remains  liable  to  carry  out  promises  on  his 
part,  though  if  the  services  are  of  such  a  nature  that  they 
can  be  performed  as  well  by  third  persons  as  by  the  orig- 
inal party,  then  the  original  party  may  transfer  through 
the  assignment  the  duty  of  performing  the  service ;  but  he 
still  remains  responsible  for  any  damages  occasioned  by 
the  failure  of  the  assignee  to  perform  (4).    If  the  con- 


(2)  Devlin  v.  New  York,  63  N.  Y.  8. 

(3)  Arkansas   Valley    Smelting    Co.    v.    Belden    Mining    Co.,    127 
U.  S.  379. 

(4)  British  Wagon  Co.  v.  Lea  &  Co.,  L.  R.  5  Q.  B.  D.  149. 


OPERATION  OF  CONTRACTS  89 

tract  involves  personal  skill — ^thus  if  A  agrees  to  pay  B  a 
sum  of  money  in  return  for  which  B  agrees  to  paint  A's 
carriage — B  could  not  assign  this  contract,  since  it  is  pre- 
sumed A  dealt  with  B  on  account  of  his  skill  as  a  painter, 
and  the  services  of  any  other  painter,  however  skilful  he 
might  be,  could  not  take  B's  place  (5).  Again  if  A  con- 
tracted to  sell  goods  to  B,  and  B  was  to  pay  therefor  60 
days  after  the  delivery  of  the  goods,  B  could  not  assign 
this  claim  against  the  objections  of  A,  since  the  agree- 
ment to  give  credit  is  based  upon  personal  credit  of  B,  and 
A  can  not  be  compelled  to  deliver  goods  on  the  credit  of  a 
third  person  (3).  If,  however,  the  sale  was  to  be  for  cash, 
B  may  assign  his  claim  since  no  element  of  credit  is  in- 
volved (6).  It  would  seem,  however,  inasmuch  as  the  as- 
signor remains  liable  on  the  contract,  that  an  assign- 
ment should  be  good,  if  personal  skill  is  not  involved, 
even  if  the  sale  is  on  credit,  since  the  seller  still  may 
look  to  the  assignor.  It  is  diflScult  to  sustain  Arkansas 
Valley  Smelting  Co.  v.  Belden  Mining  Co.  (S)  for  that 
reason  (7). 

§  104.  Same:  Personal  service.  Contracts  for  per- 
sonal services,  whether  involving  personal  skill  or  not,  are 
non-assignable.  Contracts  of  this  character  do  not  sur- 
vive the  death  of  either  party  and  for  that  reason  are  re- 
garded as  non-assignable.  Thus  in  Lacy  v.  Getman  (8) 
A  was  employed  to  work  as  a  farm  hand  for  B  for  one 
year.    B  died  within  the  year.    Since  the  farm  passed  to 


(5)  Robson  v.  Drummond,  2  Barn.  &  Ad.  303. 

(6)  Rochester  Lantern  Co.  v.  Stiles  Press  Co.,  135  N.  Y.  209. 

(7)  Tolhurst  v.  Ass'n  of  Mfgrs.  L.  R.  (1902)  2  K.  B.  660. 

(8)  119  N.  Y.  109. 


90  CONTRACTS 

the  heirs  on  the  death  of  B,  and  the  personal  estate  to  the 
administrator,  it  would  not  be  possible  for  the  administra- 
tor to  carry  out  the  contract.  The  court  also  held  that  the 
relationship  between  A  and  B  was  so  personal  that  it 
could  not  be  transferred. 

§  105.  Same:  Future  interests.  Where  the  right 
which  is  assigned  has  not  yet  arisen,  but  will  arise  in  the 
process  of  time  or  by  operation  of  law,  it  may  be  assigned. 
A  mere  expectancy,  however,  can  not  be  assigned.  For 
example,  if  A  is  employed  by  B,  he  may  assign  his  wages 
to  be  earned  in  the  future  to  a  third  person;  but  if  he 
merely  expects  to  secure  employment  with  B,  no  contract 
of  employment  yet  having  been  made  when  he  assigned 
the  right  to  his  wages  to  C,  C  obtains  nothing  from  such 
an  assignment.  A  had  no  right  to  make  the  assignment, 
as  it  was  but  a  mere  expectancy  (9). 

§  106.  Same:  Contracts  non-assignable  in  terms.  A 
contract  may  also  be  made  non-assignable  as  a  result  of 
the  agreement  of  the  parties.  Thus,  if  A  and  B  in  con- 
tracting for  the  sale  and  purchase  of  goods,  stipulate  in 
terms  that  the  contract  is  not  assignable,  any  transfer  of 
the  rights  under  the  agreement  without  the  consent  of  all 
parties  concerned  would  be  inoperative. 

§  107.  Same:  Public  policy.  Many  claims  are  not  as- 
signable for  reasons  of  public  policy.  Thus  pensions,  sal- 
aries of  public  officials,  mere  rights  of  action  for  personal 
injuries  are  not  assignable,  since  to  permit  such  assign- 
ments would  tend  to  injure  the  public  service,  or  defeat 
the  purpose  for  which  the  grant  was  made,  as  in  the  cas6 
of  the  assignment  of  a  j)ension. 

(9)     O'Keefe  v.  Allen,  20  R.  1.  414. 


OPERATION  OF  CONTRACTS  91 

§  108.    Requisites  of  a  valid  assignment.     The  law 
does  not  prescribe  any  precise  form  in  which  assignments 
must  be  made.     It  is  essential  that  the  assignor  shall 
clearly  express  his  intention  to  confer  upon  the  assignee 
the  authority  to  collect  the  particular  obligation  (10). 
An  oral  assignment  is  valid.    Where  the  claim  assigned 
is  in  writing,  the  surrender  of  the  writing  to  the  assignee 
would  be  the  usual  method.    If  the  assignee  gives  a  con- 
sideration to  the  assignor  for  the  assignment,  as  is  usually 
the  case,  he  can  compel  the  latter  to  take  all  the  steps  nec- 
essary to  put  the  assignee  in  possession  of  the  claim.    If, 
however,  A  having  a  contract  with  B  desires  to  make  a 
gift  of  that  obligation  to  C,  and  fails  to  execute  a  proper 
power  of  attorney  to  C,  the  latter  is  without  remedy 
since  the  courts  will  not  interfere  to  perfect  an  imperfect 
gift  (11).  '        -  -       -        .,.  ■  ^ 

§  109.  Notice  to  the  debtor.  It  is  not  necessary,  so  far 
as  the  rights  between  assignor  and  assignee  are  con- 
cerned, that  notice  of  the  assignment  be  given  to  the 
debtor,  but  it  is  essential  in  order  to  protect  the  rights  of 
the  assignee  against  third  persons  that  such  notice  be 
given,  siDce  the  original  obligation  still  stands,  and  if  the 
debtor  in  good  faith  pays  the  claim  to  the  original  cred- 
itor without  notice  of  the  assignment,  he  will  be  dis- 
charged (12).  If,  however,  he  has  been  notified  of  the 
assignment,  he  can  not  escape  liability  to  the  assignee  by 
payment  to  the  assignor  (13).    It  is  evident  therefore, 


(10)  Risley  v.  Phenix  Bank,  83  N.  Y.  318. 

(11)  Tollman  v.  Hoey,  89  N.  Y.  537. 

(12)  Heermans  v.  Ellsworth,  64  N.  Y.  159. 

(13)  Littlefield  v.  Storey,  3  Johns.  425. 


92  CONTRACTS 

that  notice  is  only  necessary  in  order  to  protect  the  as- 
signee against  settlements  between  the  debtor  and  the 
assignor. 

§  110.  Successive  assignments.  The  courts  are  not 
agreed  regarding  successive  assignments.  Thus,  if  A  is 
indebted  to  B,  and  B  assigns  his  claim  to  C  and  later  as- 
signs the  same  claim  to  D,  a  majority  of  courts  would 
hold  that  the  assignee  first  giving  notice  to  the  debtor 
would  be  entitled  (14).  On  the  other  hand  there  are  many 
decisions  to  the  effect  that  the  order  in  time  of  the  assign- 
ments determines  the  rights  of  the  parties.  Thus  C,  who 
received  the  first  assignment,  would  have  a  better  right 
than  D,  whose  assignment  was  later  in  time.  It  would 
seem,  however,  that  their  rights  should  be  determined  by 
the  steps  taken  by  intermediate  assignee.  Thus  if  A  as- 
signed a  claim  against  B  to  C  and  afterwards  assigned 
the  same  claim  to  D,  if  D  before  taking  the  assignment  in- 
quired of  B  whether  or  not  a  prior  assignment  had  been 
made  and  B  not  having  been  notified  of  the  transfer  to  C, 
assures  him  in  the  negative,  D  ought  to  prevail  over  G 
since  the  latter 's  failure  to  notify  the  debtor  has  misled 
D  to  his  injury.  Otherwise,  if  D  took  the  assignment 
without  inquiry. 

§  111.  Partial  assignments.  Where  A  holds  a  claim 
against  B  for  $500  and  is  indebted  to  C  for  $200,  he  may 
assign  the  entire  claim  to  C,  and  when  C  recovers  the 
amount  he  can  retain  the  amount  of  his  debt,  but  must 
account  to  the  assignor  for  the  balance.  It  is  not  possible, 
however,  for  A  to  assign  $200  of  the  claim  against  B  to  C. 


(14)     Wald's   Pollock,  Contracts    (Willlston's  ed.),   281,  note. 


OPERATION  OF  C0NTRA€9^S         93 

The  objection  is  that  there  is  but  a  single  obligation  on 
the  part  of  B  to  pay  A  $500  and  it  would  be  contrary  to 
the  terms  of  the  obligation  as  well  as  imposing  a  great 
hardship  on  B  if  A  could  split  the  demand  up  into  a  series 
of  smaller  demands,  and  render  B  liable  in  a  suit  on  each 
item.  In  the  case  of  partial  assignments  of  claims  against 
public  corporations,  as  cities,  the  assignment  is  held  in- 
valid on  still  another  ground,  namely,  that  of  public  pol- 
icy, the  courts  holding  that  it  would  seriously  embarrass 
the  administration  of  public  affairs  if  claims  of  this  kind 
could  be  split  up  (15). 

While  it  is  true  that  A  can  not  split  his  claim  against  B 
by  assignment  so  as  to  confer  upon  the  assignee  a  right 
to  sue  at  law,  yet  if  the  debtor  is  notified  of  the  partial 
assignment  and  consents  to  it,  the  majority  of  courts  per- 
mit the  assignee  to  recover  in  an  action  at  law  (16).  If 
he  does  not  consent  to  it,  nevertheless  he  will  be  liable  in 
equity  to  the  assignee  if  he  pays  the  whole  amount  of  the 
claim  to  the  original  creditor  with  notice  of  the  partial 
assignment.  While  he  is  not  bound  to  pay  a  partial  as- 
signment at  law,  he  is  bound  to  retain  in  his  hands  the 
amount  represented  by  the  partial  assignment  when  he 
settles  with  the  original  creditor.  A  failure  to  do  so  will 
render  him  liable  (17). 

§112.  Negotiable  contracts.  Third  parties  acquire 
rights  under  contracts  in  various  other  ways  that  are  anal- 
ogous to  assignment,  for  example,  in  the  case  of  nego- 
tiable paper  where  the  holder  of  the  paper  transfers  it  to 


(15)  Delaware  County  v.  Diebold  Safe  Co.,  133  U.  S.  473. 

(16)  James  v.  Newton,  142  Mass.  366. 

(17)  Bispham,  Equity  (6  ed.).  Sec.  166. 


94  CONTRACTS 

another,  the  party  acquires  a  right  which  is  determined 
by  the  law  governing  negotiable  instruments,  and  ditTers 
materially  from  the  rights  of  the  assignee.  See  the  ar- 
ticle on  Negotiable  Instruments  in  Volume  VII  of  this 
work- 

§  113.  Assignments  by  operation  of  law.  In  the  case 
of  bankruptcy  i)roceedings,  the  assignee  in  bankruptcy  is 
by  operation  of  law  substituted  for  the  bankrupt  in  all 
claims  on  contracts  due  the  bankrupt  which  are  assign- 
able in  their  nature.  AMiere  a  person  dies,  his  administra- 
tor or  executor  will  in  law  be  the  assignee  of  all  claims 
due  the  estate  and  he  may  proceed  to  collect  the  same  in 
much  the  same  manner  as  a  voluntary  assignee  may  do. 

§  114.  Rights  of  the  assignee.  Since  the  assignee 
merely  obtains  the  rights  which  his  assignor  has  in  the 
claim  assigned,  it  follows  that  any  defence  which  the 
debtor  could  have  urged  when  sued  by  the  creditor,  he  can 
likewise  urge  against  the  creditor's  assignee.  Thus  the 
fact  that  the  creditor  was  guilty  of  fraud  in  connection 
with  the  contract,  or  has  been  paid  in  whole  or  in  part, 
may  be  set  up  by  the  debtor  (18).  The  defence  of  set-off 
must  arise  before  notice  of  the  assignment,  however,  or  it 
will  not  be  available  (19).  To  pay  the  original  creditor 
after  notice  of  the  assignment  would  be  a  fraud  on  the  as- 
signee. So  also  to  acquire  any  claims  against  the  creditor 
with  a  view  to  setting  them  off  against  the  original  debt, 
will  be  ineffective  if  done  with  knowledge  of  assignee's 
rights  (20).    By  virtue  of  the  contract  of  assignment,  the 


(18)  Miller  v.  Kreiter,  76  Pa.  St.  78. 

(19)  Heermans   v.   Ellsworth,    64   N.   Y.    159. 

(20)  Welch  V.  Mandeville,  1  Wheat.  233. 


OPERATION  OF  CX)NTRACTS  95 

creditor  agrees  not  to  interfere  with  the  assignee  in  the 
collection  of  the  claim ;  hence  accepting  payment  from  the 
debtor  after  assignment  will  be  a  breach  of  contract,  even 
though  the  debtor  himself  may  be  released  as  a  result  of 
a  payment  made  in  ignorance  of  the  assignment. 


CHAPTER  Vin. 

INTERPRETATION  AND  CONSTRUCTION  OF  CONTRACTS. 

§  115.  Scope  of  subject.  Where  parties  to  a  contract 
are  unable  to  agree  as  to  the  precise  scope  of  the  obUga- 
tion,  or  are  unable  or  unwilling  for  any  reason  to  caiTy  it 
out,  the  courts  are  usually  called  upon  to  determine  the 
question  for  them.  It  may  be  presented  in  various  forms. 
Is  there  a  contract  at  all?  If  a  contract,  is  it  unenforce- 
able for  any  reason?  Granted  there  is  an  obligation  of 
some  sort  created,  what  is  its  scope?  What  must  the 
plaintiff  do  in  order  to  enforce  the  defendant's  promise? 
What  has  the  defendant  left  undone  that  he  must  do  to 
fulfil  his  obligations? 

§  116.  Problem  of  interpretation.  In  solving  these 
questions,  the  court  must  consider  the  terms  of  the  agree- 
ment, if  it  be  in  writing,  or  the  words  and  acts  of  the  par- 
ties if  the  agreement  be  oral.  It  must  take  into  account 
the  circumstances  under  which  the  agreement  was  made; 
the  meaning  of  technical  terms;  the  customs  or  practices 
of  a  particular  trade  or  calling  to  which  the  contract  re- 
lates; to  what  extent  the  prior  negotiations  and  dealings 
between  the  parties  is  to  be  considered  as  forming  a  part 
of  the  contract ;  what  acts  or  words  are  to  be  ignored.  In 
short,  the  court  must  by  considering  the  language,  acts, 
and  circumstances  of  the  parties  with  reference  to  this 
particular  agreement  decide  what  they  meant,  and  give 
effect  to  that  meaning.    The  court  sits  to  enforce  the  con- 

96 


OPERATION  OP  CONTRACTS  97 

tracts  which  the  parties  have  made  and  not  to  make  eon- 
tracts  for  them. 

§  117.  Rules  of  interpretation.  In  performing  their 
function  the  courts  make  use  of  certain  rules  to  aid  in  ar- 
riving at  the  goal  of  their  investigation,  i.  e.,  the  ascer- 
tainment of  the  intent  of  the  parties.  These  rules  are  not 
hard  and  fast  and  yield  to  the  obvious  contrary  intent  of 
the  parties  themselves.  The  statement  that  the  court  will 
carry  out  the  intention  of  the  parties  must  be  qualified  by 
the  further  statement  that  it  will  carry  out  not  necessar- 
ily the  actual  intent  or  expectation  of  the  individual  par- 
ties, but  the  intent  properly  construed.  Thus  it  may  hap- 
pen that  the  liability  enforced  is  not  the  one  the  parties 
intended  to  assume,  but  if  expressed  in  clear  terms,  the 
court  is  bound  to  give  it  the  ordinary  meaning. 

§  118.  Oral  contracts.  Where  the  agreement  sued 
upon  is  by  word  of  mouth  only,  or  partly  written  and 
partly  oral,  the  court  will  receive  in  evidence  all  the  facts 
known  to  the  parties,  the  acts  and  words  of  the  parties, 
and  the  agreement  will  be  the  final  construction  which 
the  court  puts  on  these  acts  and  words. 

§  119.  Written  contracts.  Where  the  agreement  sued 
upon  is  in  writing,  another  rule  comes  into  play.  Where 
the  writing  is  executed  in  a  formal  way,  and  is  drawn  as  a 
result  of  previous  negotiation,  it  will  be  assumed  to  em- 
body the  will  of  the  parties,  and  the  court  will  not  con- 
sider the  acts  or  words  of  the  parties  prior  to  its  execu- 
tion that  may  be  inconsistent  therewith,  since  the  final 
will  of  the  parties  is  assumed  to  be  embodied  in  the  in- 
strument. 

§  120.    Parol  evidence  rule.    Evidence  will  not  be  re- 


98  CONTRACTS 

ceived  to  add  to  or  take  from  an  agreement  which  the 
court  finds  to  be  complete.  To  do  so  would  place  every 
contract  at  the  mercy  of  unscrupulous  witnesses.  Evi- 
dence will  be  admitted,  however,  to  show  that  there  is  no 
agreement  at  all,  as  where  a  contract  is  only  to  be  ef- 
fective on  the  doing  of  an  act  by  a  third  party,  which  act 
has  not  been  done.  Evidence  will  be  received  also  to  aid 
the  court  in  determining  the  meaning  of  the  contract. 
Thus  the  parties  may  use  a  phrase  or  a  word  that  has  a 
particular  meaning  in  the  business  with  which  the  con- 
tract is  concerned;  or  where  the  language  used  is  collo- 
quial, and  has  a  particular  meaning  in  the  particular  com- 
munity; or  where  certain  terms  are  a  usual  part  of  similar 
contracts,  as  for  example  the  usages  or  rules  of  the  stock 
exchange.  Evidence  may  also  be  received  of  a  collateral 
agreement  not  inconsistent  with  the  original  contract. 
The  application  of  the  rule  frequently  involves  fine  dis- 
tinctions, and  it  is  sometimes  difficult  to  say  whether  the 
particular  evidence  invades  the  parol  evidence  rule  or  not. 
The  matter  is  discussed  in  the  article  on  Evidence  in  Vol- 
ume XI  of  this  work. 

In  the  case  of  written  contracts,  particularly,  the  court 
must  rely  mainly  upon  the  language  of  the  parties  them- 
selves, and  will  assume,  where  the  parties  use  plain,  un- 
equivocal language  having  an  accepted  meaning,  that  the 
parties  intended  it  in  its  ordinary  and  accepted  sense. 

§  121.  Dependent  or  independent  promises.  A  makes 
a  contract  with  B,  by  the  terms  of  which  A  agrees  to  sell 
a  horse  to  B,  and  B  agrees  to  pay  $500  therefor.  B  is  un- 
willing or  unable  or  hesitates  to  carry  out  his  agreement. 
A  desires  to  proceed  against  him  for  breach  of  contract. 


OPERATION  OF  CONTRACTS  99 

The  question  presented  to  the  court  is  essentially  a  ques- 
tion of  interpretation.  What  in  contemplation  of  law  do 
the  parties  intend  by  this  agreement?  Three  distinct  re- 
sults are  possible.  First,  it  may  be  said  that  the  promises 
of  A  and  B  are  entirely  distinct  and  therefore  A  can  sue 
B  on  his  promise  to  pay  $500,  leaving  B  to  sue  A  on  the 
latter 's  promise  to  deliver  the  horse;  secondly,  it  may  be 
said  that  before  A  can  recover  damages  from  B,  he  must 
deliver  the  horse  to  B,  or  attempt  to  deliver  it;  or  lastly, 
that  he  need  not  actually  deliver  the  horse  or  even  tender 
it,  but  must  be  ready  and  willing  to  do  so,  and  notify  B  of 
that  fact.  The  court  must  not  only  decide  these  questions, 
but  must  also  determine  the  time  when  the  contract  was 
to  be  perfonned,  no  time  being  stated  in  the  terms. 

§  122.  Independent  promises.  Under  the  earlier  con- 
ceptions of  the  law,  the  first  alternative  would  be  adopted, 
and  A  be  permitted  to  sue  B  without  a  tender  or  offer  of 
performance  of  any  kind.  The  two  promises  would  be  re- 
garded as  independent  of  each  other,  and  therefore  the 
question  of  A 's  duties  would  be  of  no  moment  in  deciding 
B's  liability.  Tliis  notion  of  the  independence  of  prom- 
ises had  its  origin  in  the  law  before  mutual  promises  were 
recognized  and  enforced  at  all,  and  when  undertakings 
were  in  formal  instruments  under  seal.  Thus,  if  A  and  B 
made  a  contract  of  purchase  and  sale,  A  would  execute  a 
promise  under  seal  to  sell  his  horse  to  B,  and  B  would 
execute  his  promise  under  seal  to  pay  A  $500.  This  idea 
persisted  even  after  mutual  promises  not  under  seal  were 
recognized  and  enforced,  the  courts  holding  that  while  the 
premises  were  mutual,  that  is,  given  for  each  other,  the 
performance  of  the  promises  was  not,  unless  made  so  in 


100  CONTRACTS 

terms;  hence,  it  was  necessary  to  make  the  performances 
dependent  in  tenns,  in  order  to  constitute  a  dependency  - 
of  performance. 

§  123.  Dependent  promises.  The  modern  view  is  dis- 
tinctly contrary  to  this  notion,  the  law  presuming  that 
where  the  promises  are  given  for  each  other,  the  per- 
formances are  dependent  on  each  other  also,  unless  by 
necessary  implication  from  the  facts  or  by  direct  provi- 
sion they  were  made  independent.  Dealing  with  the  above 
case  from  this  view,  the  courts  would  say  that  since  A 
gave  his  promise  to  deliver  a  horse  to  B  in  return  for  B's 
promise  to  pay  $500,  it  will  be  assumed  that  A  intended 
to  give  the  horse  only  in  the  event  that  he  received  the 
money  and  conversely  that  B  intended  to  pay  the  money 
only  in  the  event  that  he  received  the  horse.  There  being 
no  reason  on  the  facts  of  the  case  why  both  acts  can  not 
be  done  at  the  same  time,  and  it  appearing  further  that  no 
provision  is  made  for  the  extension  of  credit,  they  must 
be  performed  at  the  same  time.  Accordingly  A  could  re- 
cover on  B  's  promise  by  offering  to  perform,  and  without 
tendering  or  handing  over  his  property  to  B.  Hence,  we 
have  the  rule  of  law  that  where  mutual  promises  can  be 
performed  at  the^same  time,  they  must  be  performed  at 
the  same  time. 

§  124.  Time  for  performance.  Since  the  parties  have 
not  agreed  upon  any  specific  time  for  performance,  it  will 
be  assumed  that  performance  within  a  reasonable  time  is 
intended.  The  court  must  decide  whether  A  offered  to 
perform  within  a  reasonable  time  after  the  contract  was 
made.  What  is  a  reasonable  time  depends  on  the  circum- 
stances of  each  case,  hence  we  have  the  rule  of  law  that 


OPERATION  OF  CONTRACTS  101 

where  no  time  is  mentioned  in  the  contract,  it  must  be  per- 
formed within  a  reasonable  time.  If  the  agreement  had 
provided  that  the  horse  was  to  be  delivered  on  a  certain 
date,  as  May  1st,  the  court  would  be  relieved  of  the  neces- 
sity of  determining  the  time  of  performance,  but  the  de- 
pendency of  the  promises  will  not  be  affected  thereby. 
Since  the  sale  was  not  on  credit  and  payment  can  be 
given  at  same  time  as  the  time  of  delivery,  it  must  be 
given  at  that  time. 

§  125.  Where  act  on  one  side  requires  time.  A  prom- 
ises to  manufacture  a  table  of  a  certain  design  for  B,  and 
B  promises  to  pay  $50  for  it.  In  this  case  it  is  obvious 
that  since  A's  act  requires  time,  it  will  not  be  possible  for 
the  two  promises  to  be  performed  at  the  same  time.  B 
can  not  be  compelled  to  pay  until  A's  act  is  complete; 
therefore,  A  must  finish  the  table  before  B  can  be  re- 
quested to  pay;  hence,  we  have  the  rule  that  where  the 
promise  on  one  side  requires  time  and  the  promise  on  the 
other  side  is  to  pay  money,  the  act  requiring  time  must 
be  performed  first. 

§  126.  Where  one  act  is  to  be  done  first.  Although  it 
may  be  perfectly  possible  for  the  mutual  performances  to 
take  place  at  the  same  time  as  far  as  the  acts  themselves 
are  concerned,  yet  the  parties  may  indicate  that  one  act 
is  to  be  completed  before  the  other  is  due.  Thus,  in  the 
case  of  the  contract  by  A  to  sell  a  horse  to  B,  if  the  con- 
tract provided  that  the  horse  was  to  be  delivered  on  a  cer- 
tain date  and  the  money  to  be  paid  on  a  later  date,  it 
would  be  clear  that  B  was  entitled  to  the  horse,  without 
paying  money  at  the  time.  A  would  be  compelled  to  de- 
liver on  date  named  and  if  he  did  not,  he  would  be  liable 


Vol.  I— 11 


102  CONTRACTS 

on  the  promise.  A's  promise  is  independent,  while  B's 
promise  is  dependent,  since  if  A  did  not  deliver  the  horse, 
B  is  not  liable  to  pay.  The  same  result  follows  on  same 
principle,  where  the  terms  of  the  contract  stipulate  for 
credit. 

§  127.  Test  of  mutual  dependency.  Promises  that  are 
given  in  exchange  for  each  other  are  presumably  depend- 
ent. It  is  difficult  in  many  cases  to  decide  this  question. 
A  leases  a  farm  to  B,  and  B  contracts  to  pay  rent.  Obvi- 
ously the  transfer  of  the  land  to  B  is  in  consideration  of 
the  rent,  and  is  dependent  on  it,  and  A  could  not  recover 
rent  if  he  did  not  execute  the  lease  and  give  possession. 
Suppose  in  addition  to  the  above  promise,  A  has  also 
promised  to  keep  the  premises  in  repair.  He  fails  to  do 
so,  but  sues  B  for  rent.  Can  B  set  up  the  failure  to  keep 
in  repair!  His  right  to  do  so  will  depend  on  whether  the 
covenant  to  repair  was  given  for  the  covenant  to  pay  rent. 
Obviously  the  covenant  to  pay  rent  was  given  for  the 
lease  itself,  the  covenant  to  repair  is  a  collateral  and  sub- 
ordinate covenant  and  B  can  sue  upon  it,  but  can  not  set 
up  A's  breach  under  it  to  defeat  the  latter 's  right  to  the 
rent.  It  is  possible  for  the  parties  to  make  the  per- 
formance of  the  collateral  promise  to  repair  dependent, 
but  unless  it  is  done  in  terms  it  will  not  be  so  considered. 

§  128.  Contracts  conditional  on  satisfaction.  As  a  gen- 
eral rule  express  stipulations  of  the  parties  can  not  be  dis- 
regarded. Thus  A  makes  a  contract  with  B  to  paint  B  's 
portrait.  B  promises  to  pay  A  $1,000  if  the  picture  is 
satisfactory.  A  cannot  recover  the  money  until  he  has 
presented  a  picture  that  satisfies  B.    The  fact  that  B  is 


OPERATION  OF  CONTRACTS  103 

unusually  critical  is  immaterial,  since  A  agreed  to  take 
the  risk  of  B's  approval. 

If  A  can  show  that  B  is  acting  fraudulently  in  with- 
holding approval,  it  would  be  possible  to  recover,  since 
fraud  would  waive  the  condition.    The  mere  fact  that  the 
picture  was  well  painted  and  in  the  opinion  of  others  was 
a  good  likeness  would  not  show  bad  faith  (1).    In  all 
cases  where  personal  taste  is  involved,  it  is  extremely  dif- 
ficult to  show  bad  faith.    Where  personal  taste  is  not  in- 
volved so  directly,  as  in  a  building  contract  which  con- 
tains the  common  provision  that  no  payments  are  to  be 
made  except  on  certificate  of  architect,  the  fact  that  the 
building  was  erected  in  a  workmanlike  manner  according 
to  specifications  will  be  evidence  that  the  architect  was 
acting  in  bad  faith  in  withholding  the  certificate   (2). 
In  some  jurisdictions,  the  view  has  been  taken  that  the 
builder  can  recover  without  a  certificate,  if  he  has  in  the 
opinion  of  a  jury,  done  the  work  in  a  proper  manner  (3) .      •) 
This  view  ignores  the  provision  as  to  the  architect's  cer- 
tificate entirely,  in  effect  makes  a  different  contract  for 
the  parties,  and  can  not  be  justified. 

§  129.  Notice  of  facts  upon  which  performance  de- 
pends. When  a  performance  on  the  part  of  one  of  the 
parties  to  the  contract  depends  upon  the  happening  of  a 
certain  event  within  the  peculiar  knowledge  of  the  other 
party,  it  is  the  duty  of  the  latter  to  disclose  that  fact; 
otherwise  he  can  not  hold  the  promisor  liable.    Thus  m 


(1)  Brown  v.  Foster,  113  Mass.  136. 

(2)  Chism  v.  Schipper,  51  N.  J.  L.  1. 

(3)  Nolan  v.  Yi^hitney,  88  N.  Y.  648. 


104  CONTRACTS 

Hayden  v.  Bradley  (4)  A  rented  property  from  B,  and  B 
covenanted  to  keep  the  premises  in  repair.  It  was  held  A 
could  not  sue  B  for  failure  to  keep  the  premises  in  repair, 
unless  he  had  first  notified  him  that  the  premises  were  out 
of  repair,  and  given  B  an  ojiiwrtunity  to  perform  hia 
promise.  Wliere  the  fact  on  which  the  promisor's  liahil- 
ity  depends  is  not  within  the  i)eculiar  knowledge  of  the 
other  party  to  the  agreement,  but  is  equally  accessible  to 
the  promisor,  he  is  bound  to  ascertain  that  fad.  Thua 
where  A  makes  a  contract  with  B  to  pay  B  a  certain  sum 
as  soon  as  C  returns  from  Europe,  both  A  and  B  having 
equal  facilities  for  ascertaining  when  C  rotunis,  B  can  re- 
cover against  A  without  previously  giving  notice  to  A 
that  C  has  returned,  if  in  fact  C  has  retunied. 

§  130.  Implied  conditions.  AVliere  the  parties  them- 
selves have  not  made  the  doing  of  an  act  by  one  party  ab- 
solutely precedent  to  the  liability  of  the  other  party,  the 
court  may,  in  passing  on  the  agreement,  hold  A's  act  to 
be  precedent  to  B's  liability  under  some  circumstances, 
and  hold  it  not  to  be  under  other  circumstances.  Tlius  in 
Ritchie  v.  Atkinson  (5)  A,  the  owner  of  a  vessel,  made  a 
contract  with  B  to  bring  a  full  cargo  of  hemp  from  St. 
Petersburg  to  London  and  B  agreed  to  pay  a  certain  rate 
per  ton  freight.  It  appeared  that  A  in  good  faith  brought 
a  cargo  but  not  a  complete  cargo,  which  he  delivered  to 
B.  The  court  held  that,  since  A  had  substantially  per- 
formed his  agreement,  it  would  work  an  injustice  to  him 
to  treat  his  obligation  to  deliver  a  complete  cargo  as  an 


(4)  6  Gray  425. 

(5)  10  East  295. 


OPERATION  OF  CONTRACTS  105 

act  absolutely  precedent  to  B's  liability,  and  accordingly 
he  was  permitted  to  recover  on  the  contract  at  the  rate 
fixed  in  it,  subject  to  a  right  on  the  part  of  B  to  set  off 
any  damages  he  had  suffered  in  consequence  of  not  get- 
ting the  full  cargo.  It  is  to  be  borne  in  mind  that  if  the 
parties  had  stipulated  in  this  contract  that  the  delivery 
of  a  complete  cargo  was  an  absolute  condition  precedent 
to  any  liability  on  the  part  of  B  to  pay  freight,  the  court 
could  not  have  reached  the  conclusion  it  did  without  vio- 
lating the  actual  agreement  of  the  parties.  But  since  it 
is  possible  in  a  particular  case  to  treat  these  provisions  as 
mere  promises,  and  the  result  of  so  treating  them  will 
work  justice  between  the  parties,  the  court  will  adopt 
that  view. 

§  131.    Where  consideration  is  not  apportioned.    If  in 
the  above  cited  case  B  had  agreed  to  pay  a  lump  sum  as 
freight,  the  court  would  have  found  it  impossible  to  allow 
A  to  recover  on  the  contract,  since  it  could  not  tell  from 
the  agreement  itself  the  rate  at  which  freight  was  to  be 
paid,  and  for  the  court  to  fix  the  rate  would  be  injecting 
a  new  term  into  the  agreement;  consequently  the  result 
reached  in  this  case  is  only  possible  where  the  parties 
have  so  drawn  their  agreement  as  to  make  it  possible  to 
apportion  the  consideration  to  the  act  performed.  Again, 
if  in  the  preceding  case  it  appeared  that  A  had  returned 
to  London  with  a  very  small  fraction  of  a  complete  cargo, 
80  that  to  permit  him  to  recover  at  all  would  impose  a 
great  hardship  upon  the  defendant,  the  court  would  then 
consider  the  performance  of  A's  promise  as  necessarily 
precedent  to  B's  liability  for  the  freight,  since  it  would 


106  COxNTRACTS 

impose  greater  hardship  on  B  to  enforce  it  than  on  A  to 
defeat  recovery. 

§  132.  Installment  contracts.  Some  difficulties  have 
arisen  as  to  the  proper  interpretation  of  instalhuent  con- 
tracts. Thus  A  makes  a  contract  with  B  to  purchase  1,000 
tons  of  iron  to  bo  delivered  at  the  rate  of  200  tons  a  mouth 
until  the  entire  amount  is  delivered,  each  installment  to 
be  paid  for  on  delivery.  The  question  presented  is 
whether  or  not  this  is  to  be  treated  as  one  entire  contract 
or  as  a  series  of  separate  contracts.  If  the  latter  view  is 
taken,  it  would  follow  that  the  failure  of  A  to  deliver  any 
particular  installment  or  the  failure  of  B  to  pay  for  any 
particnlar  installment,  would  in  nowise  affect  the  rights 
of  the  parties  under  the  other  installments  since  they  are 
to  be  treated  as  separate  contracts.  If,  however,  the  con- 
tract is  treated  as  an  entire  one  for  the  delivery  of  1,000 
tons  of  iron,  delivery  by  installments  being  inserted 
merely  for  convenience  of  the  parties,  then  the  question 
whether  or  not  a  particular  installment  has  been  delivered 
or  paid  for  may  affect  the  entire  agreement.  The  gener- 
ally accepted  view  is  that  contracts  of  this  character  are 
to  be  treated  as  entire  (6).  Suppose  for  some  reason  A 
fails  to  deliver  the  first  installment.  Can  B  thereupon 
refuse  to  receive  any  future  installments,  and  set  up  A's 
failure  to  deliver  the  installment  as  a  defense  in  a  suit  ' 
upon  the  entire  contract?  Whether  he  can  do  so  would 
seem  to  depend  on  whether  or  not  the  injury  occasioned 
by  the  failure  to  deliver  one  installment  was  of  such  mag- 
nitude as  substantially  to  defeat  the  purposes  for  which  B 


(6)    Norrington  v.  Wright,  115  U.  S.  188. 


OPERATION  OF  CONTRACTS  107 

made  the  contract,  or  was  accompanied  by  conduct  on  the 
part  of  A  which  indicated  to  B  that  A  did  not  intend  to 
perform  the  agreement.  Most  of  the  English  cases  where 
the  first  question  has  arisen  have  dealt  with  the  question 
as  one  of  law,  namely  whether  as  a  matter  of  law  the  fail- 
ure to  deliver  one  installment  is  a  breach  which  will  de- 
feat the  entire  contract,  and  the  English  courts  have  gen- 
erally held  that  such  a  breach  does  not  necessarily  go  to 
the  substance  of  the  contract.  It  would  seem  that  the  ques- 
tion was  really  a  question  of  fact  depending  upon  the  pe- 
culiar circumstances  of  each  case.  If  the  evidence  shows 
that  a  failure  to  receive  the  installment  has  practically 
defeated  the  ends  which  the  purchaser  had  in  view  in 
making  the  contract,  the  failure  to  deliver  ought  to  con- 
stitute a  good  defense.  If  on  the  other  hand,  such  does 
not  appear  to  be  the  case,  the  plaintiff  ought  to  be 
allowed  to  recover  subject  to  any  set-off  which  the 
purchaser  may  have  as  a  result  of  not  receiving  the 
particular  installment. 

§133.  Same:  Illustrations.  The  English  cases  decide 
that  if  the  failure  to  deliver  a  particular  installment  or 
pay  for  a  particular  installment  is  accompanied  by  lan- 
guage or  conduct  indicating  an  intent  to  repudiate  the 
entire  obligation,  the  injured  party  need  not  perform. 
Thus  in  Withers  v.  Reynolds  (7),  A  contracted  to  sell  B 
a  quantity  of  straw  to  be  delivered  at  certain  intervals, 
each  load  to  be  paid  for  on  delivery.  After  the  delivery 
of  one  load  B  announced  to  A  that  he  would  thereafter 
hold  back  the  price  of  one  load  until  the  contract  was  com- 


(7)     2  Bam.  ft  Adol.  882. 


108  CONTRACTS 

pleted.     Since  under  the  terms  of  tlie  contract  he  was 
bound  to  pay  for  each  load  as  delivered,  the  court  found 
he  had  in  effect  repudiated  the  contract,  and  therefore 
A  was  justified  in  not  delivering  any  more.    Again  in  the 
cases  of  Freeth  v.  Burr  (8)  and  Mersey  Steel  Co.  v.  Nay- 
lor  (!)),  where  there  was  a  refusal  to  i)ay  for  a  particular 
installment,  the  court  held  that  the  failure  to  pay  was  not 
a  breach  sufficient  to  entitle  the  other  party  to  refuse  to 
perform,  since  the  refusal  was  in  good  faith,  and  in  the 
belief  that  the  party  could  not  safely  pay  the  seller  owing 
to  the  financial  difficulties  of  the  latter,  and  the  refusal 
was  not  accompanied  by  any  acts  or  words  intimating  an 
intent  to  repudiate.     The  American  cases  for  the  most 
part  have  followed  the  decision  of  the  United  States  Su- 
preme Court  in  Norrington  v.  Wright  (G)  above,  holding 
installment  contracts  to  be  entire  contracts,  so  that  the 
failure  to  deliver  a  particular  installment  at  the  time  stip- 
ulated would  justify  the  purchaser  in  refusing  to  continue 
the  contract.    The  opposite  view  was  taken  in  the  case  of 
Gerli  v.  The  Poidebard  Silk  Mfg.  Co.  (10).  Further  illus- 
trations of  the  problem  whether  or  not  a  failure  to  perform 
a  particular  provision  of  a  contract  will  justify  the  other 
party  in  refusing  to  perform,  are  found  in  Bettini  v.  Gye 
(11)  and  Poussard  v.  Spiers  &  Bond  (12).    In  the  first 
case  A  agreed  to  sing  at  B's  theater,  in  opera,  and  also  in 
concerts.     He  agreed  to  be  present  for  rehearsals  at 

(8)  L.  R.  9  C.  P.  208. 

(9)  L.  R.  9  App.  Cas.  434. 

(10)  57  N.  J.  L.  432. 

(11)  L.  R.  1  Q.  B.  D.  183. 

(12)  L.  R.  1  Q.  B.  D.  410. 


OPERATION  OF  COxNTRACTS  109 

least  two  weeks  before  the  opening  of  the  concert  season, 
but  owing  to  illness,  he  was  unable  to  appear  until  the 
time  fixed  for  the  beginning  of  his  contract.  B  set  this 
up  as  a  breach  which  justified  him  in  putting  an  end  to 
the  contract.  The  court  held,  however,  that  it  did  not 
appear  that  A  was  to  begin  his  engagements  by  singing 
in  rehearsal.  It  was,  therefore,  unnecessary  for  him  to 
appear  for  rehearsals,  and  the  breach  was  not  one  going 
to  the  substance  of  the  contract.  On  the  other  hand,  in  the 
case  of  Poussard  v.  Spiers,  A  employed  under  a  contract 
to  sing  in  opera  only,  was  unable  to  appear  at  the  open- 
ing night  of  the  opera  season.  Accordingly  B  put  an  end 
to  the  contract.  It  was  held  he  was  justified  in  doing  so, 
since  it  was  evident  that  the  failure  of  a  leading  singer  to 
appear  at  the  opening  night  of  the  opera  was  a  breach 
which  would  go  to  the  very  substance  of  a  contract,  and 
would  justify  B  in  putting  an  end  to  it,  and  making 
arrangements  with  other  parties. 

?5 134.  When  the  right  of  action  accrues.  Anticipa- 
tory breach.  Normally  the  right  of  parties  to  bring  an 
action  on  a  contract  would  be  determined  by  the  terms 
of  the  agreement  itself.  Thus,  if  A  agrees  to  convey 
property  to  B  on  January  1st,  and  fails  to  do  so  on  that 
date,  B  would  have  a  right  of  action  immediately.  If,  how- 
ever, in  October  preceding  A  had  announced  to  B  that  he 
would  not  convey  the  land,  could  B  sue  A  at  once?  It 
would  seem  on  principle  he  could  not  do  so,  since  perform- 
ance is  not  yet  due;  but  the  opposite  doctrine  has  been  de- 
veloped largely  in  cases  of  contracts  for  personal  service 
and  contracts  of  marriage.    Thus  in  Hochster  v.  De  La 


110  CiJNTK'ACTS 

Tour  (13),  A  made  a  contract  with  B  to  act  as  the  latter'a 
clerk  beginning  on  June  Ist.  In  May  B  notified  A  that  he 
would  not  require  his  services,  and  A  immediately  there- 
after brought  an  action  against  B  for  breacli  of  contract. 
It  was  urged  that  A  could  not  possibly  have  an  action 
against  B  prior  to  the  first  of  .Juno  when  his  services  were 
to  begin,  but  the  court  permitteil  recovery  on  the  theory 
that  since  B  had  repudiated  the  rontract,  A  could  treat  the 
contract  as  broken.  The  court  announced  tliat  where  one 
party  to  a  cunt i ad  lo  be  j)erformed  in  the  future  repu- 
diates it,  the  other  party  may  sue  at  once  for  a  breach,  or 
lie  can  refuse  to  accept  the  repudiation,  in  wliich  case  the 
contract  is  kept  open  for  both  parties  as  before.  Thus 
if  A  on  receiving  word  from  B  that  he  repudiated  the 
contract,  h;ul  written  to  him  insisting  that  the  contraet 
be  carried  out,  B  might  afterwards  (ail  upon  A  to  per- 
form the  senices  notwithstanding  his  fonner  repudiation, 
since  A's  refusal  to  accept  a  tennination  of  the  contract 
kept  it  alive  for  both  parties.  The  same  rule  was  applied 
in  the  case  of  Frost  v.  Knight  (14),  where  A  agreed  to 
marry  B  on  the  death  of  his  father,  and  while  his  father 
was  still  living  wrote  to  B  repudiating  the  contract.  The 
rule  of  these  cases  is  obviously  in  conflict  with  the  rule 
that  prevails  in  damages,  i.  e.  thus  where  A  is  notified  by 
B  that  he  will  not  perform  his  contract,  A  is  bound  to  take 
steps  to  keep  down  the  damages.  Thus  if  A  was  building 
a  table  for  B,  and  when  the  work  was  partially  completed 
was  notified  by  B  that  he  would  not  take  the  table,  A 


(13)  2  E.  &  B.  678. 

(14)  L.  R.  7  Exch.  111. 


OPERATION  OF  CONTRACTS        HI 

would  be  compelled  to  stop  work  on  the  same,  and  he 
could  recover  only  for  the  work  and  labor  already  per- 
formed plus  any  profit  he  would  have  made  in  carrying 
out  the  contract. 

Most  American  courts  have  followed  the  English  decis- 
ions above  noted  to  the  extent  of  recognizing  the  right 
of  a  person  to  bring  an  action  on  a  contract,  the  date  for 
the  performance  of  which  has  not  yet  arrived,  as  soon 
as  the  other  party  repudiated  it  (15). 

(15)     DanlclB  v.  Newton.  114  MasB.  530,  iB  contrary  to  this. 


CHAi'THR  IX. 

REMEDIES  FOR  BREACH  OF  CONTRACT. 

i$  135.  Available  remedies.  Whoro  onr  jKirty  to  q 
contract  uiijustitiably  fails  to  porfonu  it,  tlic  injunMl  party 
has  a  right  of  action.  Kithcr  lie  may  sue  in  a  court  of 
law  and  recover  money  damages,  or  sometimes  he  lias  an 
option  to  proceed  in  cipiity  to  have  the  contract  siwcifi- 
cally  carried  out  hy  ord^'r  of  the  court. 

5^136.  Money  damages.  In  the  grcjit  majority  of 
cases  the  only  relief  will  he  money  damages.  The  inquiry 
of  the  court  in  such  cases  is  to  find  what  sum  of  money 
awarded  to  the  injured  party  will  place  him  in  as  good  a 
position  as  he  would  have  occu])icd  if  the  defendant  had 
kept  his  promise.  Wherever  the  payment  of  money  will 
secui-e  this  result  money  damages  will  be  the  plaintiff's 
only  remedy. 

i$  137.  Specific  performance.  In  many  cases  where 
money  damages  are  not  substantially  the  equivalent  of  the 
promised  performance,  the  injured  party  may  proceed  in 
a  court  of  equity  to  have  the  defendant's  promise  specifi- 
cally enforced.  Thus,  where  A  has  contracted  to  purchase 
land  of  B,  A  may  wish  the  ]iarticular  land  as  a  homestead 
so  that  the  money  value  of  the  contract  would  not  repre- 
sent the  equivalent  of  the  performance.  Accordingly  the 
court  will  order  B  to  convey  the  land  to  A  on  receiving 

112 


OPERATION  OF  CONTRACTS  113 

the  agreed  price.  Ordinarily  this  will  be  done  with  all 
contracts  to  convey  land  or  to  sell  personal  property  that 
cannot  readily  be  purchased  in  the  market.  Contracts 
for  personal  services  will  not  be  sixicifically  enforced,  like 
a  promise  to  paint  a  picture,  even  though  money  damages 
are  not  an  equivalent.  The  subject  of  specific  perform- 
ance of  contract  is  fully  discussed  in  the  article  on  Equity 
Jurisdiction,  Chapter  II,  in  Volume  VI  of  this  work. 

§  138.  Money  damages:  Details  of  the  remedy.  All 
questions  concerning  the  measure  of  damages  in  actions 
for  breach  of  contract,  the  consequences  for  which  a 
recovery  may  be  had,  the  certainty  of  proof  required,  var- 
ious elements  of  damages,  and  special  rules  applicable 
to  particular  kinds  of  contracts  are  treated  in  the  article 
on  Damages  in  Volume  X  of  this  work. 


PARI    111. 
DISCHARGE  OF  CONTRACTS. 

ClLVrTKK   X. 
DISCHARGE  BY  ACT  OF  THE  PARTIES. 

Section  1.  Rescission. 
ji  139.  By  mutual  agreement.  Alter  partiw  liavo 
iiiadt'  a  contract,  if  for  any  reason  they  deHire  to  tcnninate 
tlicir  obli^Mtioii.'^,  tliey  may  do  so  by  mutual  release  (1). 
Thus  if  A  contracts  to  build  a  house  for  B,  tlic  contract 
may  be  ended  by  mutual  agniMnent.  The  parties  ^ive  up 
their  respective  rights  under  tlie  original  contract.  The 
new  agreement  must  contain  the  essentials  of  a  binding 
contract.  The  necessarj-  consideration  is  found  in  tlio 
mutual  giving  up  of  rights  imder  an  old  contract.  It  is  not 
enough  that  B  says  he  will  give  up  all  claims  against  A, 
since  this  would  amount  to  a  mere  olTer.  To  be  effective 
as  a  rescission  A  must  likewise  surrender  his  rights  under 
the  contract  {'2).  The  original  contract  need  not  be 
rescinded  in  terms;  if  the  parties  enter  into  a  further  con- 
tract, which  is  wholly  or  partially  inconsistent  with  the 
original,  the  latter  is  rescinded  by  implication.  A  con- 
tracts to  build  a  house  for  B  according  to  certain  spec- 
ifications.   Afterward  a  further  agreement  is  made  which 


(1)  CoUyer  &  Co.  v.  Moiilton.  9  R.  I.  96. 

(2)  King  V.  GiUett.  7  M.  &  W.  55. 

114 


DISCHARGE  OF  CONTRACTS  11^) 

changes  the  plans  of  the  house;  in  as  far  as  the  new  plans 
are  inconsistent  with  the  old,  it  rescinds  the  old  contract. 
§  140.    Dependent  relative  rescission.    If  the  new  con- 
tract is  invalid  lor  any  reason,  the  (luestion  arises  does  the 
old  contract  remain  in  force?    Thus,  A  makes  a  written 
contract  with  B  for  the  purchase  and  sale  of  goods.    Later 
an  oral  contract  is  made  relative  to  the  same  suhject  mat- 
ter.   This  contract  is  bad  because  it  is  not  in  writing.    Is 
the  old  contract  still  to  stand?    It  is  possible  for  the  new 
agreement  to  operate  as  a  rescission  if  the  parties  so 
intend  it,  and  it  will  so  operate  if  it  expressly  rescinds  it; 
but  it  will  not  rescind  it  by  implication,  since  the  courts 
will  jussume  that  the  parties  intended  to  make  a  contract, 
and  intended  that,  if  the  new  agreement  is  ineffective,  the 
original  one  shall  stand  (3). 

§  141.  Rescission  for  a  default  under  the  contract. 
Where  one  of  the  parties  to  a  contract  has  substantially 
failed  or  refu.sed  to  perfonn  within  the  time  stipulated, 
the  party  not  in  default  may  treat  the  contract  as  at  an 
end,  save  for  his  right  of  action  on  the  defaulting  party's 
promise;  thus  if  A  contracts  to  build  a  house  for  B  and 
fails  to  proceed,  B  may  elect  to  treat  the  contract  as  ended 
and  may  also  sue  A  on  his  promise. 

Section  2.    Rele.\se. 
§  142.     Release.     Tlie  right  of  action  can  be  released 
by  an  instrument  under  seal  signed  by  B  in  those  jurisdic- 
tions where  seals  are  recognized.    In  some  states  where 
seals  are  abolished  an  unsealed  release  is  effective. 
§  143.    Covenant  not  to  sue  as  a  release.    A\Tiere  the 


(3)     Noble  V.  Ward.  L.  R.  2  Exch.  135. 


116  CONTRACTS 

creditor  promises  never  to  sue,  the  promise  is  rep^arded  as 
equivalent  to  a  release;  if  the  promise  not  to  sue  is  for  a 
shorter  period,  it  will  not  operate  as  a  release  but  at 
most  as  a  suspension  of  the  action. 

Section  3.    Accord  and  Satisfaction. 

Ji  144.  Accord  and  satisfaction:  Unilateral.  If  A  is 
indebted  to  B  for  $500  which  is  due  and  B  promises  to 
release  the  debt  if  A  will  deliver  to  B  a  horse,  B  may  nev- 
ertheless sue  upon  the  original  debt  before  the  horse  is 
delivered,  and  may  even  refuse  the  horse  if  tendered,  the 
reason  being  that  B's  promise  is  a  mere  olTer  which  may 
be  withdrawn  at  any  time  before  acceptance  by  A  (4). 

§  145.  Same:  Bilateral.  If  in  the  above  case  the  par- 
ties mutually  promise  to  deliver  the  horse  and  release  the 
debt,  B  can  still  sue  A  for  the  $500,  and  the  new  contract 
will  not  be  admitted  as  a  defense.  Since  the  parties  have 
not  agreed  that  the  new  contract  shall  take  the  place  of 
the  old  obligation  (5),  the  court  will  not  allow  the  new 
agreement  to  be  set  up,  since  if  received  it  would  be  in 
law  a  complete  bar  to  any  further  action  on  the  original 
contract  (6),  and  if  A  did  not  deliver  the  horse,  B's  only 
remedy  would  be  for  breach  of  promise  to  deliver,  while 
he  only  intended  to  forego  his  rights  under  the  old  agree- 
ment in  case  the  new  promise  was  carried  out.  Hence, 
we  have  the  general  mle  that  the  new  agreement  tech- 
nically known  as  an  accord,  can  not  be  set  up  as  a  defense 
to  an  action  on  the  original  contract.    Yet  if  the  new 


(4)  Kromer  v.  Heim,  75  N.  Y.  574. 

(5)  Morehouse  v.  2nd  Nat'l  Bank,  98  N.  Y.  503, 

(6)  Ford  V.  Beech,  11  Q.  B.  852. 


DISCHARGE  OF  CONTRACTS  117 

agreement  is  carried  out,  we  have  an  accord  and  satis- 
faction which  is  a  good  defence  to  a  suit  on  the  original 
debt.  The  accord,  however,  is  itself  a  perfectly  good  con- 
tract, and  when  violated  by  the  suit  on  the  original  con- 
tract may  be  sued  upon  by  A. 

§  146.  Equitable  relief.  It  has  been  suggested  by  text- 
writers  and  a  few  courts  that  a  court  of  equity  should 
enjoin  an  action  on  the  original  contract  pending  the  per- 
formance of  the  accord,  since  this  would  not  destroy  the 
original  agreement  but  merely  suspend  the  remedy  as 
agreed,  but  little  authority  can  be  found  to  sustain  the 
proposition  (7). 

§147.  Conditional  satisfaction.  Where  the  debtor 
gives  his  note  lor  a  debt  due,  it  is  not  presumed  that  the 
original  obligation  is  discharged.  While  it  is  evident 
that  the  creditor  is  willing  to  forgive  the  old  promise  if 
the  new  promise  is  performed,  it  will  not  be  ashamed  that 
he  is  willing  to  rely  on  the  new  promise  exclusively. 
Accordingly  when  the  new  obligation  becomes  due,  and  is 
not  paid,  the  creditor  may  sue  either  on  the  new  promise 
or  the  original  one  at  his  election.  The  above  is  the  rule 
in  the  absence  of  a  clear  intent  of  the  parties  to  put  an 
end  to  the  old  transaction. 

§  148.  Instruments  under  seal.  At  common  law  an 
insti-ument  under  seal  could  not  be  discharged  by  an 
accord  and  satisfaction  by  reason  of  the  rule  that  a  sealed 
instrument  could  only  be  destroyed  by  an  instrument  of 
like  dignity,  i.  e.,  an  instrument  under  seal.    Under  the 

(7)     wald's  Pollock,  contracts   (WiUiBton's  ed.),  833;   Hall  v.  Ist 
National  Bank.  173  Mass.  16  (contra). 
Vol.  ]-\d 


118  CONTRACTS 

rule  that  equity  disregards  form,  if  a  complete  accord  and 
satisfaction  is  shown  the  courts  will  enjoin  the  action  at 
law  (8).  In  states  where  the  practice  permits  equitable 
pleas,  the  same  result  is  now  reached  by  setting  up  the 
defence  in  an  action  on  the  sealed  instrument  by  way  of 
equitable  plea-  In  consequence,  an  accord  and  satisfaction 
is  a  good  defence  to  suits  on  sealed  instruments  as  well  as 
parol  obligations. 

§  149.  Accord  and  satisfaction  by  implication.  Ac- 
cord and  satisfaction  may  bo  inferred  from  the  conduct 
of  parties  where  there  is  no  express  agreement.  Thus, 
A  has  a  claim  against  B  which  is  unliquidated.  He  makes 
a  demand  for  $50  which  he  conceives  to  be  the  amount 
due.  B  sends  his  check  for  $25  stating  it  is  payment  in 
full.  A  retains  the  check  and  notifies  B  that  he  will  apply 
the  same  on  account  and  hold  B  for  the  balance  claimed. 
If  A  sues  B  for  the  balance,  the  majority  of  American 
courts  hold  this  to  be  a  good  accord  and  satisfaction,  the 
retention  of  the  check  being  regarded  as  an  acceptance 
of  the  terms  on  which  it  was  sent  (9).  The  English  courts 
hold  that  the  mere  retention  of  the  check  will  not  be  suf- 
fici^t  evidence  to  sustain  an  accord  and  satisfaction  (10). 

Section  4.     Novation. 

§  150.  Definition.  Subsisting  obligations  under  a  con- 
tract may  be  destroj^ed  by  the  substitution  of  new  parties 
for  one  or  both  of  the  former  parties  to  the  original  obli- 

(8)  steeds  v.  Steeds,  L.  R.  22  Q.  B.  D.  537. 

(9)  Nassoiy  v.  Tomlinson,  148  N.  Y.  326. 

(10)  Day  V.   McLea,  L.  R.   22  Q.   B.   D.   610. 


DISCHARGE  OF  CONTRACTS  119 

gation.    This  method  of  rescission  is  known  in  law  as  a 
novation. 

§  151.    Substitution  of  parties.    A  substitution  of  par- 
ties is  accomplished  by  the  creation  of  a  series  of  new 
agreements  by  the  terms  of  which  one  of  the  original 
parties  is  released,  and  in  consideration  thereof,  the  new 
party  assumes  the  obligation.    To  be  valid  all  the  parties 
to  the  new  and  old  contracts  must  be  parties  to  the  new 
agreement.    Tlius,  if  A  owes  B  and  it  is  desired  to  sub- 
stitute  C  in  A's  stead,  the  parties  meet  together  and  in 
consideration  that  B  release  A,  C  promises  to  assume  the 
debt.    As  a  result  B's  claim  against  A  is  wiped  out,  and 
a  new  contract  on  the  same  terms  arises  between  C  and 
B.    It  is  not  essential  that  A  be  an  actual  party  to  this 
arrangement,  but  it  seems  necessary  that  C  be  authorized 
by  A  to  enter  into  the  contract  and  to  act  as  his  agent, 
since  it  would  be  officious  for  a  stranger  to  step  in  and  pay 
A's  debt  to  B  and  consequently  not  binding.    In  some 
cases  it  has  been  held  that  a  subsequent  assent  would 
amount  to  a  ratification  of  C's  act,  but  inasmuch  as  G 
does  not  purport  to  act  for  A,  it  is  difficult  to  sustain  the 
result  on  any  theory  of  ratification.    Very  slight  evidence 
is  enough  to  show  the  consent  of  the  original  debtor  (11). 
The  most  difficult  question  in  the  cases  is  one  of  fact  to 
determine  whether  or  not  the  creditor  really  intended  to 
release  the  debtor  (12).  The  question  is  commonly  pre- 
sented  in  this  form.  A  is  a  creditor  of  the  firm  of  B  and 
C.  It  is  agreed  between  B  and  C  that  C  shall  retire  from 

(11)  Corbett  v.  Cochran,  3  Hill  41. 

(12)  Cochrane  v.  Green,  9  C.  B.  (N.  S.)  448. 


120  CONTRACTS 

the  business  and  as  part  of  the  consideration  for  his  in- 
terest, B  agrees  to  assume  tiie  debts  of  the  firm  and  A  is 
notified  of  this  arrangement  and  assents  to  it.  It  would 
seem  that  this  would  not  constitute  a  novation  unless  A 
agreed  in  terms  to  release  C  from  liability  on  the  firm's 
debts,  and  that  an  intent  to  give  up  legal  rights  should  not 
be  assumed  merely  because  of  a  general  assent  by  the 
creditor  to  the  arrangement.  In  some  jurisdictions  if  A 
does  agree  to  release  C,  and  accepts  B  as  a  debtor,  the 
consideration  consists  in  giving  up  a  joint  right  against 
B  and  C,  and  accepting  in  lieu  thereof  the  individual  lia- 
bility of  B  which  is  different  in  legal  contemplation  from 
the  joint  liability  of  B  and  C  (13). 

In  jurisdictions  where  third  persons  are  permitted  to 
sue  upon  contracts  made  for  their  benefit,  it  would  seem 
that  the  agreement  would  lack  consideration  since  B  and 
C  have  already  contracted  that  B  shall  pay  C's  debts,  and 
as  A  could  sue  upon  this  agreement  a  subsequent  promise 
by  B  to  pay  him  would  not  constitute  a  consideration  for 
the  release  (14).  In  order  that  a  novation  shall  be  valid, 
it  is  essential  that  the  original  obligation  shall  be  an 
enforceable  one;  otherwise  the  surrender  of  it  will  not 
constitute  a  consideration  (15). 

§  152.  Substitution  of  creditors.  Where  A  has  a 
claim  against  B,  which  is  to  be  turned  into  a  claim  of  C 
against  B,  it  is  necessary  that  two  steps  be  taken:  first,  A 
must  assign  his  claim  against  B  to  C,  and  then  C  must 


(13)  Lyth  V.  Ault,  7  Exch.  669. 

(14)  Kelso  V.  Fleming.  104  Ind.  180 

(15)  Scott  V.  Atchison,  36  Tex.  76. 


DISCHARGE  OF  CONTRACTS  121 

enter  into  a  contract  with  B  by  which,  in  consideration 
of  C's  release  of  the  assigned  claim,  B  promises  to  pay 
C.  The  consideration  is  the  giving  up  of  the  assigned 
claim. 

Where  A  owes  B  and  B  owes  C,  and  it  is  desired  to 
substitue  C  for  B  in  tlie  first  contract,  C  makes  a  con- 
tract with  B,  his  do])lor,  never  to  sue  him,  in  considera- 
tion that  B  assign  his  claim  against  A  to  C;  C  now 
boing  tlic  owner  of  the  claim  makes  a  contract  with  A 
by  which  he  promises  never  to  enforce  the  assigned 
claim  in  consideration  of  A's  promise  to  pay  C.  The 
result  is  that  B  drops  out  of  the  transaction  entirely, 
a  now  contract  arises  between  A  and  C,  and  two  debts 
are  thereby  extinguished. 


CHAPTER  XI. 

ILLEGALITY. 

§  153.  Illegal  contracts.  Any  agrooment  which  lias 
for  its  purpose  the  violation  of  the  law,  or  whicli  will 
indirectly  result  in  such  violation  or  in  the  invasion  of 
some  established  rule  of  public  policy  is  illegal,  and  is 
treated  in  law  as  void.  It  is  not  necessary  that  the  ille- 
gality be  criminal,  that  is,  punishable  by  the  state.  It  is 
enough  that  it  violates  private  rights  or  a  public  policy 
not  yet  enforced  by  ca-iminal  laws.  The  fact  tliat  the 
parties  to  the  agreement  are  innocent  of  wrongful  intent 
is  immaterial,  in  general,  if  it  is  clear  that  the  promises 
when  carried  out  will  result  in  an  illegal  act.  The  law  will 
not  presume  that  the  parties  intend  an  illegal  act.  Its  ille- 
gality must  be  shown  by  clear  aflfirmative  evidence.  If  the 
contract  can  be  performed  in  two  ways,  one  legal  and 
the  other  illegal,  the  law  presumes,  in  the  absence  of  proof 
to  the  contrary,  that  the  legal  method  was  intended  and 
will  be  adopted.  In  Waugh  v.  Morris  (1)  A  chartered 
B's  ship  to  carry  a  cargo  of  baled  hay  from  a  port  in 
France  to  the  port  of  London.  Without  knowledge  of  the 
parties,  a  regulation  was  adopted  forbidding  importation 
of  hay  from  French  ports.  It  was  held,  however,  that 
the  contract  was  not  illegal,  since  it  did  not  necessarily 


{!)     L-  R.  8  Q.  B.  202. 

122 


DISCHARGE  OF  CONTRACTS  123 

mean  that  hay  was  to  be  landed  in  London.  It  might  be 
transshipped  from  the  vessel  in  the  port  of  London  and 
shipped  abroad,  and  the  court  would  presume  this  was 
the  thing  intended  in  the  absence  of  proof  to  the  con- 
trary. 

§  154.  Gaming  contracts.  Wagers  or  bets  are  illegal 
and  void  in  most  jurisdictions,  and  consequently  any  con- 
tract which  has  for  its  object  the  furtherance  of  a  wager 
is  illegal.  The  agreement  must  be  so  closely  connected 
with  the  thing  forbidden  as  to  make  the  contractor  a 
party  to  it.  Thus  A  loans  money  to  B,  a  gambler,  know- 
ing him  to  be  such,  and  suspecting  that  he  will  use  it  for 
gaming  purposes.  He  can  nevertheless  recover  the  money, 
as  his  knowledge  of  the  character  or  occupation  of  B  will 
not  make  him  a  party  to  an  illegal  act  by  B.  If  the 
money  was  loaned  for  the  express  purpose  of  gaming,  the 
loan  is  vitiated  by  the  illegal  purpose  (2). 

§  155.  Commercial  wagers.  A  makes  a  contract 
through  a  broker  for  the  purchase  of  barley  for  future 
deliver}-.  When  the  time  comes  for  deliver^'  no  grain  is 
delivered,  but  the  difference  between  the  price  agreed  and 
the  market  price  is  paid  to  vendor.  If  the  original  con- 
tract was  made  with  no  intention  of  making  a  delivery, 
the  contract  would  amount  to  a  wager  as  to  the  future 
price  of  barley  and  would  be  illegal,  but  if  delivery  in 
good  faith  was  intended  when  the  contract  was  made, 
then  a  subsequent  settlement  of  differences  would  not 
make  the  contract  illegal  (3). 


(2)  M'Kinnell  v.  Robinson,   3  M.  &  W.   434 

(3)  Pixley  v.  Boynton,  79  IH.  351. 


124  CONTRACTS 

11"  one  of  the  parties  contemplates  an  actual  delivery, 
the  fact  that  the  other  one  does  not  is  immaterial.  Evi- 
dence of  previous  contracts  between  the  same  parties, 
the  business  in  which  each  one  is  engaged,  the  facilities 
of  the  purchaser  to  receive  and  store  the  particular  com- 
modity will  be  received  for  the  purpose  of  throwing  light 
on  the  intention  of  the  parties  In  a  particular  transaction. 

§  156.  Insurajice  contracts  as  wagers.  Contracts  of 
insurance,  either  marine  or  fire  or  life,  will  be  regarded 
as  wagers  and  illegal  if  the  parties  insured  do  not  have 
an  interest  in  the  property  or  life  insured  (4).  In  the  case 
of  life  insurance,  however,  it  is  not  necessary  to  the 
validity  of  the  policy  that  the  insured  have  an  interest  in 
the  life  at  the  time  of  the  death  of  the  person  on  whom  the 
insurance  is  issued.  Thus  where  a  creditor  insures  the 
life  of  his  debtor,  and  the  debt  is  afterwards  paid,  the 
creditor  can  still  recover  on  the  policy  in  the  event  of  the 
death  of  the  debtor,  although  at  the  time  of  his  death,  he 
had  no  interest  in  the  life  of  the  debtor  (5).  See  Insur- 
ance in  Volume  VTI  of  this  work. 

§  157.  Furtherance  of  illegal  purpose.  The  sale  of  an 
article  with  the  knowledge  that  it  will  perhaps  be  used 
for  an  illegal  purpose  is  valid,  but  if  the  vendor  furthers 
that  purpose  by  the  manner  in  which  he  packs  or  marks 
the  goods,  he  is  party  to  an  illegal  act  and  the  agreement 
is  void.  Thus  in  Hall  v.  Ruggles  (6),  A  was  selling  prize 
packages  of  candy  for  purposes  forbidden  by  law,  since 


(4)  Warnock  v.  Davis,  104  U.  S.  775. 

(5)  Amick  v.  Butler,  111  Ind.  578. 

(6)  56  N.  Y.  424. 


DISCHARGE  OF  CONTRACTS  125 

it  was  a  lottery.  B  sold  candy  and  silverware  to  A  and 
delivered  it  put  up  in  the  packages  ready  for  the  lottery. 
The  court  said  mere  knowledge  of  the  illegal  purpose 
would  not  affect  B,  but  by  putting  up  packages  as  he  did 
he  must  be  regarded  as  taking  part  in  the  illegal  affair. 
Where  the  illegal  thing  furthered  is  of  imusual  turpitude 
such  as  rebellion  against  the  government,  it  has  been  held 
that  knowledge  of  the  probable  use  of  the  thing  sold  will 
be  enough  to  vitiate  the  contract  (7). 

§  158.  Agreements  in  restraint  of  trade.  It  has  long 
been  a  settled  principle  of  common  law  that  contracts  in 
unreasonable  restraint  of  trade  are  illegal  and  void,  since 
it  is  against  the  interest  of  the  state  to  permit  its  citizens 
by  contract  to  bind  themselves  not  to  exercise  skill  in 
their  chosen  calling. 

§159.  Valid  restraints:  Trade  secrets.  On  the 
other  hand  restrictive  agreements  of  a  certain  character 
have  long  been  recognized  as  valid.  Thus  the  manufac- 
turer of  a  medicine  may  have  a  secret  formula  for  pre- 
paring it.  It  is  vital  to  his  business  that  the  secret  be 
protected  and  the  law  will  aid  him  in  preserving  it  by 
enjoinmg  his  employes  from  disclosing  it  or  using  it  in 
a  rival  business  (8). 

§160.  Same:  Good  wlQ.  Frequently  one  of  the 
important  elements  of  value  in  an  established  business  is 
its  good  will,  which  may  be  defined  as  the  probability 
that  persons  who  have  previously  patronized  the  business 
will  continue  to  do  so.    It  is  recognized  as  a  property 


(7)  Hanauer  v.  Doane,  12  Wall  342. 

(8)  Fowle  V.  Park,  131  U.  S.  88. 


126  CONTR^VCTS 

right  and  wUl  be  protected.  Any  contract  that  has  for  its 
purpose  the  protection  of  the  good  will  of  a  business,  and 
is  reasonably  designed  for  that  purpose  will  be  enforced. 
In  Bishop  v.  Palmer  (9),  A  was  engaged  in  the  manufac- 
ture of  cotton  waste  and  bed  quilts.  lie  sold  the  business 
to  B  and  agreed  not  to  engage  again  in  this  business.  It 
was  held  that  the  contract  was  illegal  being  in  unreasona- 
ble restraint  of  trade.  Such  a  sweeping  restriction  was 
unnecessar)'  to  protect  the  good  will  of  the  business.  The 
earlier  decisions  laid  down  the  rule  that  covenants  of  this 
character,  unlimited  in  time  or  space,  were  illegal.  To 
comply  with  this  rule  a  sweeping  covenant  was  framed  by 
whi(di  the  promisor  agreed  never  to  engage  in  the  same 
business  except  in  a  designated  territory'.  Thus  in  Dia- 
mond Match  Co.  v.  Roeber  (10)  A  agreed  not  to  manu- 
facture matches  except  in  Nevada,  and  the  covenant  was 
sustained  under  the  above  rule.  The  later  decisions  dis- 
regard this  test  as  artificial  and  hold  that  the  validity 
of  the  covenant  must  be  determined  by  the  scope  of  the 
business  which  has  been  sold.  Thus  where  the  business 
sold  is  purely  local  to  a  city  or  town  or  even  a  part  of  a 
large  city,  a  covenant  not  to  engage  in  the  same  business 
within  an  area  much  larger  than  necessary  to  protect  the 
business  will  be  void.  In  Herreshoff  v.  Boutineau  (11) 
the  court  applied  this  test  and  held  that  an  agi-eement 
by  a  language  teacher  not  to  teach  for  one  year  in  the 
state  of  Rhode  Island  was  illegal,  since  it  was  much 


(9)  146  Mass.  469. 

(10)  106  N.  Y.  473. 

(11)  17  R.  I.  3. 


DISCHARGE  OF  CONTRACTS        127 

broader  than  necessary  to  protect  the  interest  in  ques- 
tion. On  the  other  hand,  if  the  business  is  international 
in  its  scope,  a  covenant  of  similar  scope  to  protect  the 
good  will  will  be  sustained.  In  Nordenfelt  v.  Maxim-Nor- 
denfelt  Gun  Co.  (12)  the  court  sustained  a  sweeping 
clause  of  this  character  on  the  ground  of  the  unlimited 
scope  of  the  business  sold. 

§  161.  Statutory  prohibitions.  Agreements  are  fre- 
quently entered  into  by  dealers  in  a  given  commodity, 
the  object  of  which  is  to  advance  prices  by  curtailing 
production  or  limiting  competition.  In  practically  every 
state  today  statutes  exist  which  prohibit  agreements  of 
tliis  character  and  pronounce  them  void.  The  national 
government  has  a  sweeping  statute  of  the  same  character 
commonly  known  as  the  Sherman  anti-trust  act  (13), 
providing  that  every  contract  or  combination  in  the  form 
of  a  trust  or  otherwise,  or  conspiracy  in  restraint  of  trade 
or  commerce  among  the  several  states  or  with  foreign 
nations  is  illegal. 

§  162.  Rule  in  the  absence  of  statute.  In  the  absence 
of  statutes  of  the  above  character,  contracts  designed 
to  raise  prices  or  curtail  the  production  of  a  commodity 
were  invalid  if  the  subject  matter  was  an  article  of  prime 
necessity,  such  as  flour,  bread,  provisions,  or  fuel,  but 
binding  if  not  involving  such  articles  (14).  The  later 
cases,  however,  as  a  rule  ignore  this  distinction  and  re- 
gard contracts  of  this  character  illegal  merely  because 


(12)  L.   R.    (1894)    App.    Cas.   535. 

(13)  26  X^  S.  Stat  209. 

(14)  Morris  Run  Coal  Co.  v.  Barclay  Coal  Co.,  68  Pa.  St.  173; 
Central  Shade  Roller  Co.  v.  Cushman,  143  Mass.  353. 


128  CONTRACTS 

of  their  restrictive  purpose.  In  More  v.  Bennett  (15)  an 
association  formed  for  the  regulation  of  ratos  to  be 
rliar^^ed  by  stenograpiiers  was  held  invalid,  althou^^h  it 
did  not  violate  any  statutory'  jirovision. 

5^  163.  Ag^reements  tending  to  defeat  the  administration 
of  justice:  Stifling  prosecution.  Jt  is  the  duty  of  a  citi- 
zen to  aid  in  tlic  enforcement  of  law,  consequently  any 
contract  whicli  has  for  its  puri>ose  the  stifling  of  crimi- 
nal  prosecution  is  illegal.  Thus  if  A  is  charged  with 
theft  from  B,  an  ai^reement  whereby  B  agrees  not  to 
ai)pear  against  A  in  consideration  of  money  paid  by  A 
or  on  his  account  is  void  {](]).  Wliere  A  has  stolen  ])rop- 
erty  from  B  the  act  constitutes  an  invasion  of  B's  rights 
as  well  n»  a  public  olTence,  B  c^in  sue  A  for  the  loss 
in  a  civil  action,  or  settle  with  A,  and  the  settlement 
will  stand  unless  it  appears  that  P>  has  expressly  or  im- 
pliedly agreed  not  to  prosecute  A  criminally.  In  all 
states  compounding  a  felony  is  an  offense  in  itself,  and 
consequently  any  agreement  with  that  object  in  view 
would  bo  criminal,  but  even  if  such  a  law  did  not  exist, 
the  contract  would  be  void  as  tending  to  defeat  the  ad- 
ministration of  justice. 

§164.  Same:  Exceptions  to  above  rule.  It  frequently 
is  necessary  in  the  administration  of  justice  where  sev- 
eral parties  are  charged  with  a  crime,  in  order  to  convict 
any  of  them,  to  absolve  one  of  tfie  accused  on  condition 
that  he  will  testify  freely  against  his  companions.  Such 
an  agreement  is  within  the  discretion  of  the  court  and 


(15)  140  III.  69. 

(16)  WiUiams  v.  Bayley,  L.  R.  1  H.  of  L.  200, 


DISCHARGE  OF  CONTRACTS        129 

prosecuting  attorney  and  may  be  allowed.  It  is  really 
not  sustained  as  a  contract,  but  on  the  theory  that  the 
case  is  dismissed  as  a  reward  for  the  evidence  given  (17). 

§  165.  Same:  Champerty.  Modem  rule.  The  law 
does  not  look  with  favor  on  the  institution  of  baseless  liti- 
gation. The  expense  of  bringing  and  maintaining  a  suit 
deters  persons  from  bringing  action  on  groundless  and 
doubtful  claims.  Any  agreement  which  removes  this 
risk  and  consequently  tends  to  encourage  litigation  is 
illegal.  Thus,  A  may  have  a  claim  against  B  which  is  so 
doubtful  that  lie  would  not  take  the  risk  of  suing  upon 
it.  An  attorney  agrees  with  A  to  sue  upon  the  claim,  pay 
all  expenses  of  the  suit,  and  receives  as  his  compensation 
a  share  of  the  proceeds  of  the  suit,  if  successful;  and 
nothing,  if  not  successful.  Such  an  arrangement  removes 
all  responsibility  from  A  and  the  action  amounts  to  a 
speculation.  Such  a  contract  was  known  in  law  as  a 
champertous  agreement  and  is  void. 

The  rule  as  to  champerty  has  been  generally  relaxed 
under  modem  decisions  and  a  majority  of  the  courts  now 
recognize  that  an  agreement  by  which  the  attorney  is  to 
receive  a  contingent  fee,  i.  e.,  a  certain  part  of  the  avails 
of  a  suit  or  an  amount  fixed  with  reference  to  the  amount 
recovered,  is  valid  as  long  as  the  attorney  does  not  agree 
to  pay  the  expenses  and  costs  of  the  action  (18). 

§  166.  Same:  Maintenance.  Where  A,  a  stranger  to 
B,  promises  to  pay  all  expenses  if  B  will  bring  suit 
against  C,  the  agreement  is  illegal  for  the  same  reasons 


(17)  Nickelson  v.  Wilson,  60  N.  Y.  362. 

(18)  Blaisdell  v.  Abern,  144  Mass.  393. 


130  CONTRACTS 

as  a  cliampertous  contract.  Such  an  arrangement  is 
known  in  law  as  maintenance.  Where  A  is  interested 
in  the  suit  or  related  to  B,  the  agreement  is  valid. 

§  1G7.  Agreement  to  influence  public  oflQcials.  Agi-ee- 
mcnts  by  which  A  for  a  consideration  agrees  to  present 
IVs  claim  to  a  legislative  committee,  a  commission,  or 
a  court,  are  valid  provided  the  undertaking  is  merely  to 
present  the  claim  on  its  merits  (ID).  11",  however,  tho 
agreement  contemplates  the  use  of  the  personal  influence 
of  the  promisor  or  the  exerting  of  j)ressure  not  connect- 
ed with  the  merits  of  the  particular  case,  the  agreement 
is  bad.  In  Trist  v.  Child  (20)  A  contracted  to  press  B's 
claim  against  the  United  States  then  pending  before 
Congress,  and  it  ai)peared  that  A  was  to  secure  the  pas- 
sage of  the  claim  by  personal  influence  with  members 
of  Congress,  irrespective  of  the  merits  of  the  claim.  The 
agreement  was  accordingly  held  illegal.  \Vhere  a  per- 
son or  corporation  is  charged  with  a  duty  with  respect 
to  the  public  interest,  as  where  railway  companies  are 
charged  with  the  duty  of  locating  their  road  and  estab- 
lishing stations  at  points  which  in  their  judgment  best 
sen^e  the  public  convenience,  a  contract  by  which  for  a 
consideration  they  agree  to  locate  their  road  and  estab- 
lish stations  at  points  agreed  upon  with  private  persons, 
is  illegal  as  against  public  policy.  The  fact  that  the  lo- 
cation selected  really  is  reasonably  convenient  for  the 
public  is  immaterial,  since  the  vice  of  the  transaction  con- 
sists in  foregoing  the  exercise  of  the  discretion  reposed 


(19)  Houlton  V.  Nichol,  93  Wis.  393. 

(20)  21  Wall.  441. 


DISCHAROE  OF  CONTRACTS  131 

in  them  with  respect  to  a  public  interest  (21),  The  same 
rule  applies  as  to  the  discretion  to  be  exercised  by  a  pub- 
lic oflBcLal.  Thus  where  A,  the  postmaster  at  X,  agreed  to 
locate  the  post-office  on  projx^rty  adjacent  to  B's  store 
in  consideration  of  B's  promise  to  pay  part  of  the  rent, 
the  agreement  was  held  illegal  (22).  Other  agreements 
which  tend  to  injure  the  public  service  and  are  illegal  for 
that  reason  are  agreements  to  use  personal  influence  to 
secure  an  election  or  appointment  to  oflSce  (23). 

§  168.  Restraint  of  marrisige.  Agreements  which 
threaten  the  security  of  an  Institution  recognized  and  en- 
couraged by  the  state  are  illegal  as  against  public  policy. 
The  institution  of  miirriage  is  of  this  class;  accordingly 
agreements  between  married  people  for  future  separa- 
tion, contracts  not  to  marrj',  or  marriage  brokerage  con- 
tracts, are  void  as  tending  to  injure  the  marital  relation. 

§  169.  Contracts  to  defraud  third  persons.  AMiere  a 
contract  Ls  entered  into  between  two  parties  which  has 
for  its  object  or  results  in  a  fraud  on  a  third  person,  the 
agreement  is  illegal  and  no  recovery  can  be  had.  In  Hol- 
comb  V.  Weaver  (24),  A  engaged  B  to  secure  a  compe- 
tent contractor  to  erect  a  house  for  him.  B  engaged  C 
and  made  a  contract  with  him  by  which  C  was  to  pay  B 
a  sum  of  money  for  procuring  the  contract.  In  an  action 
by  B  against  C  to  recover  the  amount  promised,  the  court 
held  the  contract  illegal,  since  the  transaction  was  a  fraud 
on  A.    He  had  relied  upon  and  was  entitled  to  the  best 


(21)  Woodstock  Iron  Co.  v.  Richmond  Extension  Co.,  129  U.  S.  643. 

(22)  Woodman  v.  lunes,  47  Kan.  26 

(23)  Gray  v.  Hook,  4  N.  Y,  449. 

(24)  136  Mass.  265. 


132  CONTRACTS 

judgment  of  B  in  selecting  a  competent  contractor.  B 
by  recommending  C  for  a  consideration  violated  this, 
and  the  result  was  fraud  on  A. 

§  170.  Sunday  contracts.  In  most  jurisdictions  stat- 
utes exist  prohibiting  work,  labor,  and  business  on  Sun- 
day except  works  of  necessity  and  charity,  and  hence  a 
contract  made  on  Sunday  which  does  not  come  under  the 
head  of  necessity  or  charity  may  be  illegal.  These  stat- 
utes have  been  construed  very  strictly  in  some  jurisdic- 
tions, and  in  consequence,  the  authorities  are  much  in 
conflict,  so  that  it  is  impossible  to  lay  down  any  general 
iTile  as  to  the  result  of  such  agreements.  It  is  common 
to  permit  a  recovery  for  the  value  of  service  performed 
or  property  transferred  as  a  result  of  the  Sunday  con- 
tract, the  courts  taking  the  view  that  these  contracts, 
while  illegal,  are  not  immoral,  and  therefore  they  are 
disposed  to  limit  the  effect  of  such  statutes  (25). 

§  171.  The  effect  of  illegality.  As  a  general  rule,  the 
law  will  not  interfere  to  aid  either  party  to  an  illegal  con- 
tract for  the  purpose  of  adjusting  their  rights  under  it. 
The  parties  are  compelled  to  submit  to  the  predicament 
which  their  own  illegal  acts  have  brought  about,  however 
unequal  those  results  may  be.  This  rule  arises  from  the 
fact  that  the  parties  entering  into  such  a  contract  have 
contemplated  the  violation  of  the  law,  and  therefore  can 
not  expect  the  aid  of  the  law  to  extricate  them  from  their 
difficulties.    To  this  rule  there  are  certain  exceptions. 

§  172.  Where  the  contract  is  divisible.  If  it  be  possi- 
ble to  separate  the  illegal  part  of  the  contract  from  the 


(fi5)     Greenhood,  Public  Policy,  546. 


DISCHARGE  OF  CONTRACTS        133 

legal  part,  the  courts  will  frequently  permit  recovery  on 
the  legal  portion.  Thus  if  A  agrees  to  pay  $1,000  to  B 
for  his  stock  of  goods  and  also  $500  to  B  for  an  agree- 
ment on  B's  part  never  to  re-engage  in  the  business,  the 
second  part  of  the  contract  is  bad  because  of  the  unlimited 
restriction  imposed  by  the  covenant.  This  first  part, 
however,  can  be  enforced  since  the  value  of  the  first  prom- 
ise is  fixed  by  the  agreement  of  the  parties.  Even  where 
the  consideration  is  entire,  that  is,  where  A  agrees  to 
pay  a  lump  sum  of  $1,000  for  the  stock  of  goods  of  B  and 
the  covenant  of  B  not  to  re-engage  in  the  business,  while 
the  covenant  not  to  re-engage  in  the  business  is  illegal, 
yet  if  A  is  willing  to  pay  the  $1,000  for  the  stock  of  goods, 
he  is  entitled  to  insist  that  B  shall  carry  out  his  con- 
tract (26). 

A  person  who  promises  to  do  a  legal  and  an  illegal 
act  in  consideration  of  a  lump  sum  can  not  recover  for  the 
legal  act  unless  it  can  be  separated  from  the  illegal  act. 
Thus  A  was  employed  as  a  waiter  in  a  billiard  hall  oper- 
ated by  B.  The  conduct  of  the  billiard  hall  was  a  legal 
business,  but  in  addition  to  this,  B  was  engaged  in  the 
illegal  sale  of  liquors  on  the  premises.  A's  contract  pro- 
vided that  he  was  to  perform  services  in  both  the  legal 
and  illegal  business.  The  amount  which  he  was  to  receive 
for  the  legal  act  was  not  separated  from  the  amount  he 
was  to  receive  for  the  illegal  act,  and  the  court  held,  ac- 
cordingly, that  he  could  not  recover  at  all  (27). 
§  173.    Where  the  act  is  highly  immoral.    Where  the 


(26)  Fishell  v.  Gray,  60  N.  J.  L.  5. 

(27)  Bixby  v.  Moor,  51  N.  H.  402, 
Vol.  I— 14 


134  CONTRACTS 

parties  enter  into  a  contract  involving  legal  and  illegal 
acts  and  the  consideration  is  not  apportioned  to  these  acts, 
it  has  been  held  that  a  performance  of  the  legal  act  will 
not  give  rise  to  a  cause  of  action,  where  the  illegal  acts 
were  of  a  highly  immoral  character  (28).  A  agreed  to 
pay  B  $50  if  B  would  dig  a  ditch  across  A's  land  and  se- 
cure the  dismissal  of  an  indictment  against  A.  Tlie  court 
held  that  dismissal  of  the  indictment  was  highly  immoral, 
tending  to  defeat  the  administration  of  the  criminal  law, 
and  for  that  reason  A  could  not  recover  against  B  for 
not  digging  a  ditch. 

§  174.  Acts  forbidden  or  penalized  by  statute.  Fre- 
quently a  statute  will  impose  a  penalty  for  doing  a  cer- 
tain act  but  does  not  declare  the  doing  of  such  an  act 
to  be  void,  and  it  becomes  necessary  to  determine  the 
proper  construction  of  such  a  statute.  It  may  be  a  mere 
revenue  provision  which  in  effect  says  to  the  parties, 
''You  may  do  the  act  on  paying  the  price  named  in  the 
statute."  On  the  other  hand  it  may  be  intended  as  a 
punishment  for  the  act  which  is  also  regarded  as  illegal. 
It  has  been  suggested  as  a  test  that  where  parties  may 
continue  to  do  the  act  without  further  liability  under  the 
statute,  it  is  to  be  construed  as  a  revenue  provision 
merely,  but  where  an  additional  act  subjects  him  to  a 
further  penalty,  it  is  to  be  regarded  as  prohibitory  of  the 
act  itself. 

§  175.  Intention  of  parties  inunaterial.  If  the  object 
of  the  agreement  is  unlawful,  either  by  reason  of  an  ex- 
press violation  of  the  statute  or  because  it  invades  some 


(28)     Lindsay  v.  Smith,  78  N.  C.  328. 


DISCHARGE  OF  CONTRACTS  135 

rule  of  public  policy,  the  agreement  is  void,  regardless 
of  the  intent  of  the  parties  to  it  (29).  The  purpose  of 
the  parties  in  entering  into  the  agreement  is  immaterial 
where  it  is  clear  that  the  agreement  if  carried  out  will 
be  a  violation  of  the  law. 

§  176.  Right  of  innocent  party.  If  one  of  the  parties 
to  a  contract  does  not  know  of  the  illegal  purpose  to 
which  the  subject  matter  of  the  agreement  is  to  be  put, 
he  can  recover  on  the  agreement.  This  is  illustrated  by 
cases  already  referred  to  where  money  is  advanced  which 
is  used  by  the  borrower  in  a  gambling  transaction.  K 
the  lender  does  not  know  of  the  gambling  transaction, 
and  does  not  loan  the  money  for  the  express  purpose  of 
being  used  in  gambling,  he  can  not  be  regarded  as  a  party 
to  an  illegal  transaction  and  may  recover  on  the  borrow- 
er's promise.  It  is  to  be  borne  in  mind  that  a  mere  knowl- 
edge that  the  property  is  likely  to  be  used  for  an  illegal 
purpose  is  not  enough,  under  the  decisions  of  the  Ameri- 
can courts,  to  implicate  the  lender. 

§  177.    Negotiable  paper  given  for  illegal  purposes.   If 

negotiable  paper  is  issued  as  a  result  of  an  illegal  trans- 
action, and  a  suit  is  brought  upon  it  by  the  original  par- 
ties, the  illegal  purpose  may  be  shown  to  defeat  the  ac- 
tion. If,  however,  the  paper  is  transferred  to  a  bona  fide 
purchaser  for  value  without  notice  of  the  illegal  incep- 
tion of  the  paper,  he  may  recover  upon  the  paper  under 
the  law  governing  negotiability.  If,  however,  a  statute 
declares  the  transaction  is  illegal,  and  provides  that  all 
transactions  within  the  prohibitory  act  are  void,  even  a 


(29)     Harriman  v.  Northern  Securities  Co.,  197  U.  S.  244. 


136  CONTRACTS 

bona  fide  purchaser  can  not  recover  on  the  ])aper  since 
it  is  treated  in  law  as  never  having  a  legal  existence.  In 
New  V.  VV^alker  (3U)  a  statute  provided  that  all  vendors 
of  patent  rights  must  file  with  the  clerk  of  the  court 
verified  copies  showing  their  right  to  the  patent,  and 
any  negotiable  paper  issued  for  a  patent  should  provide 
on  its  face,  "Given  for  patent  right."  A  gave  a  nego- 
tiable note  to  B  in  return  for  a  patent  right,  which  did 
not  contain  this  provision  on  the  face  of  it,  and  the  paper 
afterwards  came  into  the  hands  of  C,  an  innocent  person. 
It  was  held  that  he  could  recover  since  the  paper  itself 
did  not  give  him  notice  that  it  came  within  the  statute 
and  he  did  not  have  knowledge  from  any  other  source 
(31).  See  the  article  on  Negotiable  Instruments  in  Vol- 
ume VII  of  this  work. 

§  178.  Parties  not  in  equal  fault.  Where  the  parties 
are  not  in  equal  fault  in  an  illegal  contract,  and  the  agree- 
ment does  not  involve  moral  turpitude,  the  courts  will 
frequently  permit  the  innocent  party  to  recover  (32). 
A  was  seeking  to  make  a  settlement  with  his  creditors  and 
all  had  agreed  to  accept  fifty  cents  on  the  dollar  and 
release  their  claims  except  B.  B  refused  to  enter  into 
the  arrangment  unless  he  was  given  an  additional  com- 
pensation which  A  paid  him.  A  was  permitted  to  re- 
cover back  the  money  on  the  ground  that  his  situation 
was  such  that  he  was  pressed  by  B.  In  general,  it  may 
be  said  that  where  the  party  has  been  induced  to  enter 
into  a  contract  without  knowledge  of  its  illegal  charac- 


(30)  108  Ind.  365. 

(31)  1  Daniel,  Negotiable  Instruments,  Sec.  197. 

(32)  Tracy  v.  Talmage,  14  N.  Y.  162,  181. 


DISCHARGE  OF   CONTRACTS  137 

ter,  or  by  fraud  or  duress  or  undue  influence,  the  court 
will  relieve  him  from  the  agreement.  In  Duval  v.  Well- 
man  (33)  A  entered  into  a  contract  with  a  marriage 
broker  by  which  she  paid  the  broker  $50  in  return  for  his 
undertaking  to  find  a  suitable  husband  for  her.  She  after- 
wards brought  an  action  to  recover  back  the  money  and 
the  court  permitted  her  to  do  so,  holding  that  agree- 
ments of  this  character  are  prima  facie  induced  by  undue 
influences,  and  that  to  rescind  the  agreement  will  serve 
to  prevent  the  consummation  of  illegal  acts  and  there- 
fore should  be  allowed. 

§  179.  Where  the  illegaJ  purpose  is  not  consummated. 
Since  the  purpose  of  the  law  in  refusing  recovery  on 
illegal  contracts  is  to  discourage  the  making  of  such 
agreements,  if  the  contract  is  still  executory,  and  the  pri- 
mary purpose  will  be  best  realized  by  permitting  recov- 
ery, the  law  will  do  so.  In  Block  v.  Darling  (34)  A  turned 
over  property  and  money  to  B  for  the  purpose  of  de- 
frauding A's  creditors.  The  transaction  had  not  been 
consummated  and  it  was  held  that  A  might  recover  back 
the  money  since  to  permit  him  to  do  so  would  defeat  the 
illegal  purpose.  It  is,  therefore,  a  question  in  each  case 
whether  the  recovery  will  not  tend  to  prevent  illegality 
and  if  it  clearly  will  do  so,  the  court  will  permit  a  re- 
covery. 

§  180.  Recovery  from  a  stakeholder.  Where  A  makes 
a  bet  with  B  and  the  money  is  put  into  the  hands  of  C 
as  a  stakeholder,  before  the  money  is  paid  over  by  C  to 


(33)  124  N.  Y.  156. 

(34)  140  U.  S.  234. 


138  COxNTRACTS 

the  winner  either  party,  on  notifying  him  that  they  have 
revoked  the  transaction,  may  recover  back  t\w  money 
from  the  stakeholder,  and  if  he  does  not  pay  it  over  after 
such  notice,  he  is  liable.  The  theory  of  recovery  here 
is  the  same  as  in  the  preceding  case,  namely,  that  re- 
covery tends  to  discourage  illegal  acts  (35).  In  many 
jurisdictions  statutes  provide  for  the  recovery  by  the 
party  of  funds  held  by  the  stakeholder. 

§  181.  Conflict  of  laws.  A  contract  may  bo  made  in 
one  state  to  Ix^  peri'onned  in  another,  and  may  be  sued 
upon  in  a  third.  The  contract  may  be  legal  or  illegal  in 
some  of  these  states  and  not  in  the  others.  The  law  ap- 
plicable to  such  problems  is  discussed  in  the  article  on 
Conflict  of  Laws  in  Volume  IX  of  this  work. 


(35)     Hampden  v.  Walsh,  1  Q.  B.  D.  189;    Beruard  v.  Taylor,   23 
Ore.  416. 


CHAPTER  Xn. 

IMPOSSIBILITY. 

§  182.    Risk  of  loss.    Where  a  person  gives  a  promise 
to  do  an  act  in  the  future,  he  is  generally  held  to  have 
assumed  all  the  risks  incident  to  that  performance.    Thus 
in  case  of  building  contracts,  the  contractor  assumes  the 
risk  that  the  prices  of  material  and  labor  will  advance; 
that  the  building  before  completion  may  be  destroyed 
by  fire;  or  that  the  ground  on  which  the  building  is 
erected  may  be  of  so  unstable  a  character  as  to  necessitate 
increased  expense  on  his  part.    All  these  risks  are  inci- 
dent to  the  contract  and  are  taken  into  consideration  by 
every  careful  person  in  making  a  contract  to  be  per- 
formed in  the  future.     It  applies  not  only  to  building 
contracts,  but  to  all  agreements  for  future  performance. 
§  183.     Absolute  impossibUity.  Where  the  thing  under- 
taken is  absolutely  impossible  of  performance,  according 
to  human  experience,  the  agreement  will  be  void.    Tlius 
an  agreement  by  which  A  promises  to  put  his  finger 
against  the  sky  in  return  for  B's  promise  would  be  void 
because  of  its  physical  impossibility.     Such  agreements 
are  regarded  as  merely  illusory. 

§  184.  Impossibility  known  to  one  party  only.  If  the 
act  to  be  performed  is  one  physically  possible  but  for 
some  reason  is  impossible  of  performance,  and  that  im- 
possibility is  known  to  only  one  of  the  parties  to  theagree- 

139 


140  CONTRACTS 

ment  while  the  other  party  in  good  faith  entered  into  the 
agreement,  the  contract,  while  unenforceable,  yet  will 
give  rise  to  liability  in  favor  of  the  person  who  has  acted 
in  good  faith  in  ignorance  of  the  impossibilit>'.  Thus 
A,  a  married  man,  enters  into  a  contract  to  niarrj'  B. 
B  is  ignorant  that  A  is  married  and  enters  into  the  agree- 
ment in  perfect  good  faith.  B  will  be  permitted  to  re- 
cover damages  for  breach  by  A,  but  the  action  is  really 
based  not  on  the  contract,  although  it  may  be  so  in  form, 
but  on  the  fraud  of  A  in  inducing  B  to  enter  into  such 
an  arrangement. 

§  185.  Subsequent  impossibility.  "Wliere  the  act  which 
the  parties  have  undertaken  becomes  impossible  of  per- 
formance subsequent  to  the  contract,  the  question  arises 
whether  the  risk  of  this  impossibility  is  assumed  by  the 
party  undertaking  to  perform  the  act,  or  whether  he  is 
excused  from  further  performance  by  reason  of  the  im- 
possibility. In  determining  this  question,  the  court  must 
consider  the  intent  of  the  parties,  and  the  nature  of  the 
event  which  creates  the  impossibility.  If  it  appears  that 
the  impossibility  was  due  to  some  act  which  ordinarily 
might  be  anticipated,  and  would  be  regarded  by  a  prudent 
person  as  one  of  the  risks  to  be  taken  into  account  when 
the  contract  is  made,  the  promisor  will  not  be  excused. 
In  Superintendent  v.  Bennett  (1)  A  contracted  to  erect 
a  school  house  for  B.  Owing  to  latent  defects  in  the  soil, 
the  building  fell  down  when  partially  completed.  The 
court  held,  however,  that  this  was  not  a  defense  to  an 
action  on  the  contract  by  A,  since  it  was  his  business  to 


(1)     27  N.  J.  L.  513. 


DISCHARGE  OF  CONTRACTS        141 

take  into  ooDBideration  the  nature  of  the  soil,  and  he 
must  be  held  to  assume  the  risk  of  it,  it  being  one  of 
the  incidents  of  such  a  contract.    It  is  generally  held 
that  parties  will  not  be  presumed  to  assume  risks  which 
are  beyond  hmnan  experience  or  control.    While  a  per- 
son may  be  assumed  to  contemplate  the  intervention  of 
circumstances,  as  in  the  preceding  case,  yet  if  the  impos- 
sibility is  created  by  some  circumstance  beyond  ordinary 
experience,  the  court  will  assume  the  parties  did  not  in- 
tend to  take  the  risk  of  this,  unless  they  did  so  in  tenus 
or  by  clear  implication.    Various  illustrations  of  the  rule 
appear  below. 

§  186.  Acts  of  God.  A  makes  a  contract  to  serve  B 
for  a  period  of  time  as  clerk.  Shortly  after  entering  the 
sei-vice  he  becomes  ill,  and  is  unable  to  carry  out  this 
agreement.  A  will  not  be  held  liable  for  failure  to  per- 
form, since  his  failure  is  due  to  an  act  beyond  his  control; 
and  the  courts  will  assume,  in  a  contract  for  personal 
service,  that  the  parties  intend  the  agreement  not  to  be 
binding  on  either  party  if  it  is  prevented  by  the  sickness, 
death,  or  insanity  of  either  (2).  Sickness  \s  commonly 
spoken  of  as  an  act  of  God,  and  it  is  said  that  where  a 
performance  is  prevented  by  act  of  God,  there  is  no  lia- 
bility, unless  the  risk  is  assumed  in  terms. 

An  act  of  God  as  used  in  this  connection  means  an  event 
which  as  between  the  parties  and  for  the  purpose  of  the 
matter  in  hand  can  not  be  definitely  foreseen  or  con- 
trolled (3).    It  would  seem  under  this  definition  of  an  act 

(2)  Yerrington  v.  Greene,  7  R.  I.  589. 

(3)  Wald's    Pollock.    Contracts    (Williston's    ed.),    535. 


142  CONTRACTS 

of  God,  that  the  question  in  each  case  is  one  of  interpre- 
tation as  to  what  risk  the  parties  intended  to  assume, 
and  what  not  to  assume.  Since  acts  of  God  are  usually 
extraordinary  and  uncontrollable  acts,  it  is  held  that  they 
are  not  contemplated  by  the  parties  and  hence  their  oc- 
currence excuses  performance. 

§  187.  Impossibility  known  to  delinquent  party.  If 
the  impossibility  was  known  by  the  party  who  seeks  to 
set  it  up  as  a  defense,  he  can  not  thus  use  it.  Thus,  if 
the  illness  of  a  party  to  a  contract  for  personal  services 
is  set  up,  and  he  was  aware  at  the  time  of  entering  into 
the  contract  that  he  would  be  incapacitated  for  perform- 
ance before  the  completion,  the  failure  to  perfonn  will 
be  regarded  as  his  own  fault  and  not  an  act  of  God.  The 
impossibility  may  be  due  to  illness  of  which  the  defendant 
was  aware,  but  which  it  was  reasonable  to  believe  was 
but  temporary  in  its  character,  in  which  case  it  may  ordi- 
narily be  set  up  as  a  defense.  Thus  A  contracted  to  marry 
B.  At  the  time  of  the  contract  he  was  suffering  from  a 
curable  disease.  After  the  engagement  the  disease  be- 
came chronic,  rendering  him  unfit  to  marry,  and  it  was 
held  that  this  would  constitute  a  defense  (4). 

If  both  the  parties  know  that  one  of  them  is  suffering 
from  an  incurable  disease,  they  may  be  taken  to  have  as- 
sumed the  risk  and  to  intend  that  the  contract  be  car- 
ried out  in  spite  of  such  disease.  The  only  possible 
ground  of  defense  would  be  that  a  marriage  between 
parties  thus  situated  would  be  against  public  policy.  The 
courts  have  not  taken  this  ground  to  any  extent.    Thus 


(4)     Sanders  v.  Colman,  97  Va.  690. 


DISCHARGE  OF  CONTRACTS        143 

in  Hall  v.  Wright  (5)  A  sued  B  for  breach  of  promise  of 
marriage.  B  defended  on  the  ground  that  he  was  afflict- 
ed with  a  disease  that  would  make  marriage  dangerous 
to  life.  The  majority  of  the  court  held  that  the  fact  that 
inconvenience  or  danger  to  one  of  the  parties  would  re- 
sult from  the  marriage  was  not  enough,  since  B  could 
still  give  A  social  standing  by  marriage  and  a  position  as 
his  wife,  and  if  A  desired  the  contract  to  be  carried  out, 
B  must  either  carry  it  out  or  pay  damages  for  breach. 
This  case  would  probably  not  be  followed  in  the  United 
States  generally  (6).  Where  a  person  agrees  to  marry 
and  by  reason  of  some  physical  defects  is  incapable  of  a 
valid  marriage,  the  liability  would  seem  to  rest  on  tort, 
since  the  court  would  not  give  damages  for  breach  of  an 
agreement  that  if  carried  out  would  be  annulled.  The 
same  rule  should  apply  as  where  a  person  already  mar- 
ried enters  into  a  contract  to  marry  another  who  is  ig- 
norant of  the  incapacity. 

§  188.  Contract  dependent  on  the  existence  of  a  par- 
ticular thing.  A  party  may  make  a  contract  which  is  de- 
pendent on  the  continued  existence  of  a  particular  thing. 
When  the  thing  ceases  to  exist  through  no  fault  of 
either  party,  the  performance  is  mutually  excused.  A 
contracted  to  rent  a  music  hall  to  B  for  a  series  of  con- 
certs. Before  the  time  of  performance  arrived,  the  build- 
ing was  destroyed  by  fire  without  the  fault  of  either 
party.  The  court  held  that  this  agreement  was  dei^endent 
upon  the  continued  existence  of  the  music  hall,  and  its 
destruction  relieved  him  from  liability.    Again,  in  Howell 


(5)  E.  B.  &  E.  765. 

(6)  37  Amer.  L.  Rev.'  226. 


144  CONTRACTS 

V.  Coupland  (7)  A  made  a  contract  with  B  to  buy  of  the 
latter  200  tons  of  potatoes  to  be  grown  on  certain  land  be- 
longing to  B.  B  planted  his  land  in  potatoes,  and,  without 
his  fault,  a  disease  attacked  the  crop  and  B  harvested 
only  29  tons.  In  an  action  against  him  for  failure  to  de- 
liver, it  was  held  that  this  was  not  an  agreement  to  de- 
liver under  all  circumstances,  but  to  deliver  200  tons  of 
potatoes  grown  on  certain  land,  and  the  parties  must  be 
assumed  to  have  intended  to  base  their  contract  on  the 
ability  to  raise  potatoes  on  this  land.  On  the  other  hand 
in  Anderson  v.  May  (8),  A  contracted  to  purchase  590 
bushels  of  beans  of  B  to  be  raised  by  B.  B  planted  a  crop 
to  supply  this  contract,  but  it  was  destroyed  by  an  early 
and  unusual  frost.  A  sued  B  for  not  delivering  the  beans 
and  was  allowed  to  recover,  the  court  holding  that  since 
the  agreement  did  not  specify  the  particular  land  "on 
which  the  beans  should  be  raised,  it  was  still  possible  as 
far  as  the  facts  are  shown,  for  the  defendant  to  have 
raised  beans  to  satisfy  the  contract  on  other  land,  so  no 
case  of  impossibility  is  established.  This  case  can  be 
reconciled  with  the  preceding  one  only  on  the  theory  that 
in  the  first  case  the  contract  could  only  be  satisfied  by 
raising  potatoes  on  certain  specified  land,  whereas  in  the 
latter  case  no  such  limitation  was  found,  the  only  restric- 
tion being  that  B  must  raise  the  beans. 

§  189.  Acts  of  law.  Contracts  may  become  impossible 
of  performance  by  reason  of  some  legislative  act,  execu- 
tive order,  or  judicial  decree.  To  proceed  with  a  per- 
formance in  the  face  of  such  prohibition  would  be  illegal, 


(7)     L.  R.  1  Q.  B.  D.  258. 
.(8X    50  Minn.  280. 


DISCHARGE  OF  CONTRACTS        145 

and  while  the  performance  is  still  physically  possible  it 
is  not  legally  so  (9).  In  People  v.  Globe  Ins.  Co.  (10),  an 
insurance  company  employed  A  as  agent  for  a  period  of 
five  years.  Before  the  period  of  performance  had  ex- 
pired, the  company  was  dissolved  in  an  action  by  the  at- 
torney general  of  the  state.  The  court  held  that,  by  anal- 
ogy to  a  contract  for  personal  service  between  individ- 
uals, the  dissolution  of  the  company  was  the  same  as  a 
death  and  the  parties  would  be  presumed  to  have  im- 
pliedly limited  their  liability  in  such  cases  and  therefore 
no  liability  for  the  unexpired  period  arose  in  favor  of  A. 
The  court  intimated  a  different  rule  would  apply  where 
the  dissolution  was  due  to  the  misconduct  of  the  corpora- 
tion. There  is  no  doubt  that  where  a  corporation  volun- 
tarily dissolves,  it  would  be  liable  on  all  the  unexpired 
contracts  for  personal  service,  unless  such  liability  were 
expressly  excepted  (11). 

An  act  may  become  impossible  in  law,  not  because  the 
law  prohibits  the  doing  of  a  particular  thing  contracted 
for,  but  because  it  makes  it  impossible  to  do  it  in  fact, 
Thus  in  the  case  of  Commonwealth  v.  Overby  (12),  A  was 
charged  with  the  crime  of  counterfeiting  in  the  state 
courts  of  Kentucky.  B  gave  bond  for  A's  appearance  in 
court.  Later  A  was  arrested  by  the  federal  authorities 
on  the  same  charge,  convicted,  and  sent  to  prison  for 
which  reason  B  was  unable  to  produce  A  in  court  as  pro- 
vided in  the  bond.    B  was  held  not  liable,  the  arrest  mak- 


(9)  Wald's    Pollock,    Contracts    (WMlliston's    ed.),    387,    note. 

(10)  91  N.  y.  174. 

(11)  Wald's    Pollock,    Contracts    (Williston's   ed.),    548. 

(12)  80  Ky.  208. 


146  CONTRACTS 

ing  it  impossible  to  conform  to  the  bond.  On  the  other 
hand  in  the  case  of  Taylor  v.  Taintor  (13),  A  was  bonds- 
man for  B  who  was  charged  with  a  crime  in  Connecticut. 
While  at  large  on  bail,  B  went  to  New  York  and  was 
there  arrested.  On  extradition  he  was  taken  to  Maine, 
where  he  was  convicted  of  a  crime  and  sent  to  prison,  for 
which  reason  A  was  unable  to  produce  him  in  Connecti- 
cut. A  was  held  liable  on  the  bond  on  the  ground  that  it 
was  his  fault  that  B  was  permitted  to  leave  Connecticut, 
and  secondly,  since  the  laws  of  a  foreign  state  are  treated 
as  facts,  the  retention  of  B  by  the  state  of  Maine  was  not 
an  act  of  law  in  Connecticut.  Assuming  that  A  was  with- 
out fault,  it  would  seem  that  as  the  proceedings  by  which 
B  was  removed  were  sanctioned  by  the  laws  of  the  United 
States,  it  might  properly  be  assumed  the  parties  intended 
this  as  an  implied  exception  to  the  rule,  and  such  was  the 
view  of  the  minority  of  the  court.  The  rule  that  the  law 
of  a  foreign  country  or  state  is  treated  as  a  fact  is  un- 
questioned, and  for  the  purposes  of  this  rule,  the  several 
states  of  the  United  States  are  regarded  as  foreign  to  each 
other  (14). 

§  190.  Acts  of  war.  A  contract  may  be  rendered  im- 
possible by  reason  of  war.  The  term  "war"  as  used  in 
this  connection  means  armed  conflict  between  organized 
governments;  hence,  mere  insurrections,  riots,  and 
strikes,  though  attended  by  violence,  will  not  excuse  non- 
performance of  a  contract  (15). 

§  191.    Increased  expense.    The  fact  that  the  expense 

(13)  16  Wall.  366. 

(14)  Harriman,  Contracts,  Sec  269,  a. 

(15)  Summers  v.  Hibbard,  153  111.  102. 


DISCHARGE  OF  CONTRACTS        147 

of  a  performance  has  been  unexpectedly  increased  will 
ordinarily  not  excuse  non-performance.  Thus  in  Brown 
V.  Eoyal  Ins.  Co.  (16)  the  insurance  company  after  a  loss 
occurred  elected  to  rebuild  the  premises  insured,  which 
had  been  partially  destroyed  by  fire.  As  the  ruins  of  the 
building  were  regarded  as  unsafe  by  the  building  com- 
missioners, they  ordered  the  building  torn  down.  This 
greatly  increased  the  expense  of  rebuilding,  but  the  court 
held  that  it  did  not  present  a  case  of  impossibility,  but 
merely  more  expense  in  doing  a  possible  act. 

§  192.  Alternative  contracts.  Where  a  party  has  the 
alternative  of  doing  one  of  two  acts  and  the  performance 
of  one  of  these  acts  becomes  impossible,  the  promisor  will 
still  be  held  liable  to  perform  the  possible  act.  Thus  A 
leased  mineral  lands  to  B  and  B  agreed  to  pay  two  pence 
a  ton  for  ore  raised,  not  less  than  2,000  tons  to  be  raised 
annually,  or  pay  a  fixed  rent,  at  his  option.  Held,  the 
fact  that  no  minerals  were  found  would  not  excuse  non- 
performance of  the  contract,  since  it  was  still  possible  for 
the  lessee  to  pay  rent  (17). 

§  193.  Impossibility  occasioned  by  act  of  the  party. 
Where  impossibility  is  occasioned  by  the  act  of  the 
party,  it  amounts  to  a  breach,  and  can  not  be  set  up  as  a 
defense.  Thus  where  the  subject-matter  of  the  contract 
is  destroyed  or  conveyed  away,  preventing  performance, 
the  promisor  will  not  be  relieved. 

§  194.  Rights  of  parties  where  contract  can  not  be  per- 
formed on  account  of  impossibility.    The  question  is  fre- 


(16)  1  E.  &  E.  853. 

(17)  The  Marquis  of  Bute  v,  Thompson,  13  M.  &  W.  487. 


148  CONTRACTS 

quently  presented  as  to  the  rights  of  one  who  has  par- 
tially perfoiined  under  a  contract  which  becomes  impos- 
sible of  performance  without  any  fault  on  his  part.  In 
dealing  with  this  question,  it  must  be  borne  in  mind  that 
impossibility  is  a  mere  defense  for  non-performance. 
Thus  if  A  fails  to  perform  because  of  impossibility,  he  is 
excused  from  liability  for  non-performance,  but  it  does 
not  follow  that  he  has  any  rights  against  the  other  party 
in  consequence  of  acts  already  done.  Tims  if  A  agrees  to  ' 
build  a  house  for  B  to  be  paid  for  on  completion,  B  is  not 
liable  to  pay  for  the  house  until  it  is  completed.  The 
fact  that  the  building  is  destroyed. by  a  fire  or  by  a  cy- 
clone before  completion  would  seem" to  impose  no  liability 
on  B.  He  has  not  received  any  benefit  under  the  agree- 
ment, and  his  contract  provides  that  he  is  not  to  be  liable 
until  the  house  is  delivered.  If  the  house  is  to  be  com- 
pleted by  a  particular  time,  and  just  prior  to  that  date  the 
buiJding  was  destroyed,  the  question  arises,  can  the 
promisor  go  ahead  and  erect  another  house  and  compel 
the  other  party  to  accept  it?  This  would  depend  some- 
what on  the  terms  of  agreement,  and  the  conduct  of  the 
other  party.  Thus  if  it  appears  that  the  completion  of 
the  building  by  the  date  named  was  an  absolute  essential 
to  B,  it  would  seem  that  A  could  not  go  ahead  and  build 
another  house,  but  if  it  was  not  an  absolute  essential  and 
consequently  did  not  go  to  the  essence  of  the  agreement, 
or  if  B  waived  the  performance  of  the  provision  as  to 
date,  then  A  could  go  ahead  and  erect  another  building, 
and  compel  payment  therefor.  If  no  time  is  fixed  for  per- 
formance, a  reasonable  time  will  be  presumed.  What  con- 
stitutes a  reasonable  time  will  depend  on  the  circum- 


DISCHARGE  OF  CONTRACTS  149 

Stances  of  each  case,  and  in  determining  it  it  would  be 
proper  to  take  into  consideration  the  difficulties  which  the 
contractor  has  had  to  deal  with  through  no  fault  of  his 
own.     The  fact  that  the  building  was  practically  com- 
pleted and  then  destroyed  by  a  cyclone  or  fire  may  be 
taken  into  consideration  in  determining  a  reasonable  time 
for  performance.    In  case  of  contracts  for  personal  serv- 
ices, the  courts  of  the  United  States  generally  allow  re- 
covery for  services  actually  performed  prior  to  the  im- 
possibility.   Recovery  is  not  based  on  the  express  con- 
tract but  on  the  implied  contract  (18).    Where  A  is  to 
perform  services  on  the  property  of  B,  as  in  a  contract  by 
A  to  repair  B's  house,  A  is  permitted  to  recover  for  serv- 
ices actually  rendered  up  to  the  time  of  the  destruction 
of  the  property,  on  the  ground  that  since  the  property  on 
which  he  is  working  is  in  the  custody  and  control  of  the 
other  party,  he  is  presumed  to  assume  the  risk  of  its  con- 
tinued existence  (19). 

(18)  Keener,  Quasi-Contracts,  p.  241. 

(19)  Butterfield  v.  Byron,  153  Mass.  517. 


CHAPTER  Xin. 

MISTAKE. 

§  195.    Mutual  mistake.    Where  the  parties  to  a  con- 
tract are  both  laboring  under  a  mistake  as  to  the  subject 
matter,  or  an  essential  term  of  the  contract,  the  agreement 
is  of  no  legal  validity  since  no  actual  agreement  with  ref- 
erence to  a  common  object  has  been  made.    In  Eaffles  v. 
Wichelhaus  (1),  A  agreed  to  sell  a  cargo  of  cotton  to  B, 
to  arrive  by  the  ship  Peerless  from  Bombay.    It  appeared 
that  there  were  two  ships  of  that  name  from  Bombay,  one 
sailing  in  October,  and  the  other  in  November.    A  had  in 
mind  the  cargo  of  the  first  ship,  and  B  the  cargo  of  the 
second  ship.     It  was  accordingly  held  that,  since  the 
minds  of  the  parties  had  never  met  on  a  common  subject 
matter,  no  contract  was  made.    Mutual  mistake  as  to  the 
character  or  value  of  the  thing  sold  will  not  avoid  the 
contract,  where  it  is  clear  that  the  parties  agree  as  to  the 
subject  matter  of  the  sale.    In  Wood  v.  Boynton  (2),  A 
sold  a  stone  to  B  for  one  dollar.    Both  parties  were  igno- 
rant of  the  nature  of  the  stone.     The  stone  was  after- 
wards found  to  be  a  diamond  worth  $700.    The  contract 
was  held  binding,  since  it  was  clear  that  both  parties  in- 
tended this  particular  stone  to  be  the  subject  matter  of 
the  sale.    The  contract  was  to  sell  this  stone  irrespective 
of  its  character. 


(1)  2  H.  &  C.  906. 

(2)  64  Wis.  265. 


150 


DISCHARGE  OF  CONTRACTS        151 

§  196.  Mistake  by  one  party.  Where  only  one  of  the 
parties  is  laboring  under  a  mistake,  which  was  not  in- 
duced by  the  other  party,  the  contract  is  binding.  In 
Smith  V.  Hughes  (3)  A  contracted  to  sell  oats  to  B.  A 
tendered  new  oats  which  B  refused  to  receive  on  the 
ground  that  he  thought  he  was  buying  old  oats.  B  was 
held  liable  on  the  ground  that  the  contract  did  not  call 
for  old  oats,  so  A's  tender  of  new  oats  was  good.  If  it 
had  appeared,  however,  that  A  knew  that  B  thought  he 
was  being  promised  old  oats,  the  result  would  have  been 
different. 

§  197.    Mistake  as  to  identity  of  a  party.    The  above 

principle  applies  where  one  party  is  laboring  under  a  mis- 
take as  to  the  identity  of  the  other  party  to  the  contract. 
Thus  if  A  contracts  with  B  in  the  belief  that  B  is  another 
person  of  the  same  nam.e  with  established  credit,  the  con- 
tract will  be  binding  unless  B  has  by  false  representa- 
tions induced  that  belief.  This  would  certainly  be  true 
where  the  parties  are  dealing  face  to  face.  If  the  con- 
tract is  by  correspondence,  there  is  some  doubt,  and  the 
rule  applied  in  the  case  of  mistake  as  to  subject  matter 
might  apply. 

§  198.  Mistake  known  to  the  other  party.  Where  a 
party  knows  or  should  have  known  that  the  other  party 
is  acting  under  a  mistake,  the  law  will  not  permit  him  to 
take  advantage  of  it.  In  Hume  v.  United  States  (4)  A 
agreed  to  furnish  shucks  to  the  United  States  for  sixty 
cents  a  pound.    It  was  customary  to  buy  shucks  by  the 


(3)  L.  R.  6  Q.  B.  597. 

(4)  132  U.  S.  406. 


152  CONTRACTS 

hundred  weight,  but  in  the  blank  furnished  by  the  United 
States  the  word  pounds  was  printed.  Since  shucks  were 
not  woiih  more  than  two  cents  a  pound,  the  court  held 
that  A  must  have  known  that  there  was  a  clerical  error, 
and  that  the  United  States  did  not  intend  to  accept  a  bid 
at  least  thirty  times  the  real  value  of  the  thing  contracted 
for. 

§  199.  Mistake  as  to  form.  It  frequently  happens  that 
the  parties  have  come  to  an  agreement,  but  the  instrument 
actually  drawn  up  and  signed  fails  to  state  the  agreement. 
Thus,  if  the  contract  is  for  the  purchase  of  land,  the  con- 
tract may  fail  to  describe  the  land  actually  intended  to  be 
sold.  In  cases  of  this  class,  a  court  of  equity  will  receive 
evidence  of  the  agreement  actually  intended  and  direct 
that  the  writing  be  changed  to  conform  to  that  intent. 
The  same  rule  applies  where  the  writing  fails  to  use  ap- 
propriate terms  in  describing  the  liability  intended  to  be 
assumed.  See  the  article  on  Equity  in  Volume  VI  of  this 
work. 


CHAPTER  XIV. 
IMPROPER  CONDUCT  INDUCING  THE  CONTRACT. 

§  200.  Non-disclosure  of  facts.  In  general  it  may  be 
said  that  parties  negotiating  for  a  contract  are  not  bound 
to  disclose  all  the  facts  which  might  materially  affect  the 
making  or  the  terms  of  the  contract.  Thus,  if  A  offers  to 
buy  B  's  farm  for  $25  per  acre,  the  ordinary  value  of  farm 
land,  knowing  that  valuable  minerals  have  been  found 
on  adjoining  lands,  and  B  accepts  the  offer,  A  is  entitled 
to  his  bargain  and  is  under  no  duty  to  disclose  to  B  the 
mining  possibilities  of  the  land  which  greatly  increase  its 
selling  value.  The  parties  are  said  to  be  dealing  at  arm 's 
length,  and  B  has  no  right  to  complain  since  A  has  not 
misled  him. 

If,  however,  A  stood  in  a  confidential  relationship  to  B, 
as  for  example  A  was  B  's  agent,  and  in  the  course  of  his 
duties  had  discovered  the  mineral  wealth  of  the  land,  he 
would  be  compelled  to  make  a  full  disclosure  of  the  facts, 
if  the  contract  were  to  stand  (1).  The  same  rule  is  ap- 
plied to  all  contracts  where  the  essential  facts  are  within 
the  peculiar  knowledge  of  one  party,  and  his  relation  to 
the  other  party  is  such  that  good  faith  requires  a  full  and 
frank  statement.  Contracts  of  insurance,  and  the  allot- 
ment of  shares  in  corporations  by  promoters  are  the  usual 
class  of  agreements  where  this  rule  is  applied  (2). 


(1)  Dambmann  v.  Schulting,  75  N.  Y.  55. 

(2)  Walden  v.  Louisiana  Insurance  Co.,  12  La.  134. 

153 


154  CONTRACTS 

§  201.  Affirmative  misrepresentations.  During  the  ne- 
gotiations preliminary  to  the  actual  contract,  many  state- 
ments may  be  made  relative  to  the  subject  matter  of  the 
contract  for  the  i)urpose  of  inducing  the  other  party  to 
contract.  If  it  turns  out  that  some  of  these  statements 
are  untrue,  to  what  extent  is  the  contract  affected? 

It  may  be  that  the  statement  is  an  immaterial  one,  and 
the  contract  is  not  affected  at  all.  Thus  A  is  negotiating 
for  the  purchase  of  a  Iiorse  from  B.  B  states  that  the 
horse  was  once  ridden  by  ex-President  Roosevelt.  This 
would  obviously  be  an  immaterial  fact,  unless  it  appears 
that  A  is  only  willing  to  buy  a  horse  that  has  been  so  rid- 
den. Again  B  may  state  that  the  horse  is  the  best  horse 
in  the  country.  Such  a  statement  is  the  mere  expression 
of  B's  opinion,  and  even  if  false  will  not  affect  the  con- 
tract, since  it  is  obviously  mere  boasting  by  B  about  his 
property  (3).  If,  however,  B  makes  a  statement  of  fact 
which  is  untrue,  and  which  induces  A  to  make  the  con- 
tract, A  would  be  entitled  to  rescind  the  contract.  If  A 
were  purchasing  the  horse  for  breeding  purposes,  and  B 
stated  that  the  horse  was  sired  by  X,  a  noted  race-horse, 
which  statement  was  untrue,  A  could  refuse  to  carn,^  out 
the  contract.  The  fact  that  B  thought  the  statement  was 
true  and  made  the  statement  in  good  faith  will  not  affect 
A's  right  to  repudiate  the  contract,  although  it  may  af- 
fect the  relief  open  to  A.  B's  statement  that  the  horse 
was  sired  by  X  is  a  statement  of  fact  which  is  untrue.  It 
has  induced  A  to  buy  the  animal ;  his  assent  to  the  offer 
was  not  a  real  assent.    Since  he  only  intended  to  buy  an 


(3)     Deming  v.  Darling,  148  Mass.  504. 


DISCHARGE  OF  CONTRACTS  155 

animal  sired  by  X,  he  can  unquestionably  rescind.  The 
fact  that  B  made  the  statement  in  good  faith  will  relieve 
him  of  a  charge  of  fraud,  and  A's  only  remedy  is  to  re- 
scind the  contract  or  set  up  the  falsity  of  B  's  statement  as 
a  defense  when  sued. 

§  202.  Distinction  between  effect  of  misrepresentation 
and  of  fraud.  If  B  had  known  that  the  statement  was 
false,  when  he  made  it,  or  had  acted  recklessly  without 
investigation,  A  could  sue  him  for  fraud,  and  recover 
damages  or  rescind  at  his  pleasure.  The  practical  dis- 
tinction between  a  false  material  statement,  knowingly 
made  with  intent  to  mislead  A,  and  a  false  material  state- 
ment innocently  made  with  intent  to  induce  A  to  buy,  is 
in  the  remedy  open  to  A.  In  the  first  case  he  has  his  rem- 
edy for  fraud,  or  may  rescind  the  contract  (4).  In  the 
second  case,  he  may  rescind  merely,  or  defend  on  the 
ground  of  the  falsity  of  the  statement  if  sued  on  the  con- 
tract (5),  but  can  not  sue  in  deceit.  In  both  cases  the 
statement  must  be  material,  and  the  other  party  must 
act  upon  it.  If  A  knows  that  B  is  not  telling  the  truth,  he 
cannot  afterwards  claim  that  he  was  misled  by  the  state- 
ment. If  A  wishes  to  have  a  remedy  against  B  under 
such  circumstances,  he  must  insist  that  B's  statement  be 
incorporated  into  the  contract  itself. 

§  203.  What  is  a  false  statement.  To  constitute  fraud 
there  must  either  be  a  statement  which  is  false  or  a  state- 
ment not  untrue  in  itself,  but  accompanied  by  such  a  sup- 
pression of  facts  as  to  convey  a  false  impression.    Thus  in 


(4)  Hotchkin  v.  Bank,  127  N.  Y.  329. 

(5)  Wilcox  V.  Iowa  Wesleyan  University,  32  la.  367. 


156  CONTRACTS 

Newell  V.  Kandall  (6)  A,  a  merchant,  applied  to  B,  a 
wholesale  dealer,  for  credit.  B  requested  A  to  make  a 
statement  of  his  financial  condition.  A  sent  a  statemeni 
showing  the  property  owned  by  him,  cash  on  hand,  etc., 
but  did  not  state  that  his  outstanding  obligations  ex- 
ceeded the  amount  of  his  property.  The  statement  was 
true  as  far  as  it  went,  but  the  failure  to  state  his  liabili- 
ties amounted  to  a  false  statement.  The  representation 
must  be  one  of  fact,  A  mere  opinion  which  is  unfounded 
will  not  affect  the  contract.  Thus,  if  A  says  certain 
property  is  worth  $5,000,  the  other  party  must  rely  upon 
it  at  his  peril.  If,  however,  A  states  that  he  paid  $5,000 
for  the  property,  which  is  untrue,  we  have  a  misstatement 
of  a  fact  which  may  invalidate  the  contract  (7). 

§  204.  Statements  of  law.  The  rule  is  laid  down 
broadly  that  a  misrepresentation  of  law  will  not  give  ris/j 
to  an  action  for  fraud.  It  is  said  that  everyone  is  pra 
.sunied  to  know  the  law,  and  to  permit  ignorance  of  la'v\ 
to  be  set  up  would  result  in  confusion  and  injustice.  This 
does  not  seem  convincing,  and  it  has  been  suggested  that 
the  presumption  that  every  one  knows  the  law  should  be 
limited  to  general  rules  of  law,  and  should  not  apply  to 
private  rights  under  the  law  (8).  In  general,  however, 
the  statement  that  the  law  is  thus  and  so  will  be  regarded 
as  a  mere  statement  of  opinion,  which,  as  we  have  seen, 
the  other  party  relies  upon  at  his  peril  (9).  The  rule  may 
be  limited  by  other  circumstances.    Thus  if  the  parties 


(6)  32  Minn.  171. 

(7)  Fail-child  v.  McMahon,  139  N.  Y.  290. 

(8)  Cooper  v.  Phibbs,  L.  R.  2  H.  L.  170. 

(9)  Fish  V.  Cleland,  33  111.  237. 


DISCHARGE  OF  CONTRACTS  157 

stand  in  a  confidential  relationship  to  each  other,  and  the 
one  giving  the  information  has  superior  means  of  knowing 
the  truth,  if  the  statement  is  false  relief  may  be  had  (10). 
The  statement  of  law  may  also  be  involved  with  misstate- 
ment of  facts,  in  which  case  relief  is  given.  See  the  ar- 
ticle on  Equity  in  Volume  VI  of  this  work. 

§  205.  Effect  of  fraud.  A\Tiere  a  person  has  been  in- 
duced by  fraud  to  make  a  contract,  several  alternatives 
are  open  to  him.  He  can  treat  the  contract  as  valid,  and 
sue  in  tort  for  the  fraud.  He  can  rescind  the  contract  by 
proceedings  in  equity,  or  he  can  wait  until  sued  upon  the 
contract  and  set  the  fraud  up  as  a  defence.  The  proper 
course  to  pursue  will  depend  on  the  circumstances  of  each 
case.  Since  the  contract  is  binding  until  set  aside,  rights 
of  third  persons  may  intervene  that  will  limit  the  remedy. 
Thus,  if  A  sells  a  horse  to  B,  induced  by  B's  fraud,  and  B 
sells  the  horse  to  C,  who  is  ignorant  of  the  fraud,  A  cannot 
recover  it,  since  B  has  title  and  can  convey  it  to  C  (11). 
The  only  remedy  then  would  be  an  action  for  deceit 
against  B. 

If,  on  discovering  the  fraud,  A  does  any  act  which  indi- 
cates his  intention  to  rely  upon  the  contract,  he  cannot 
afterwards  rescind,  if  the  other  party  has  changed  his  po- 
sition in  reliance  on  A's  conduct  (12). 

§  206.  Undue  influence  and  duress:  In  general.  The 
principle  on  which  relief  is  given  in  case  of  fraud  is  that 
the  assent  of  the  defrauded  party  is  unreal  because  he 
was  led  to  agree  to  the  contract  in  the  belief  that  certain 


(10)  Westervelt  v.  Demarest,  46  N.  J.  L.  37. 

(11)  Rowley  v.  Bigelow,  12  Pick.  307. 

(12)  Crooks  V.  Nippolt.  44  Minn.  239. 


158  CONTRACTS 

facts  are  true,  when  they  are  not.  The  same  principle  ap- 
plies in  cases  of  undue  influence  and  duress.  In  fraud 
the  mind  of  the  promisor  does  not  assent  by  reason  of  the 
false  statement  which  he  assumes  to  be  true.  In  the  case 
of  undue  influence,  the  mind  of  the  promisor  does  not  as- 
sent because  his  will  is  dominated  by  the  will  of  the  one 
exerting  the  influence.  In  form,  the  promise  is  that  of  the 
promisor;  in  reality,  the  promisor  is  a  mere  automaton 
registering  the  controlling  will  of  the  person  exerting  the 
influence.  In  the  case  of  duress,  the  will  of  the  promisor 
does  not  operate  because  of  fear  which  the  actual  or 
threatened  violence  either  to  the  promisor  himself,  or  to 
his  wife,  parent  or  child  may  cause. 

§  207.  Undue  influence:  Special  cases.  Cases  of  un- 
due influence  more  commonly  arise  in  connection  with 
wills,  where  some  member  of  the  family  succeeds  in  im- 
pressing his  will  on  that  of  the  enfeebled  testator.  The 
doctrine  is  not  limited  to  this  class  of  cases,  however.  A 
presumption  of  undue  influence  arises  where  the  parties 
stand  in  unequal  relation  to  each  other,  as  where  the  cred- 
itor exacts  excessive  interest,  or  the  debtor  agrees  not  to 
redeem  mortgaged  premises.  Some  of  these  cases  are 
controlled  by  statute.  Again,  where  the  relationship  be- 
tween the  parties  is  one  of  dependency,  as  parent  and 
child,  trustee  and  beneficiarj^  etc.,  transactions  between 
parties  in  these  classes  are  prima  facie  unfair  and  will 
not  be  allowed  to  stand  except  on  a  clear  showing  as  to 
fairness  and  frankness  in  the  transaction  (13). 

§  208.    Effect  of  undue  influence  and  duress.    Agree- 


(13)     Ross  V.  Conway,  92  Cal.  632. 


DISCHARGE  OF  CONTRACTS  159 

ments  obtained  as  the  result  of  undue  influence  or  duress 
are  not  void.  Tlie  same  rules  as  to  relief  that  apply  in 
the  case  of  fraud  are  applicable  here  also  (14).  The  ef- 
fect of  such  conduct  in  equity  is  discussed  in  the  article 
on  Equity  Jurisdiction  in  Volume  VI  of  this  work. 


(14)     Jenkins  v.  Pye,  12  Pet.  (U.  S.)  241. 


QUASI-CONTRACTS. 


WALTER  WHEELER  COOK, 

A.  B.,   A..  M.   (Columbia  University) 
Iili.  M.  (Columbia  TTnlversity) 


I'rofesKor  of  Law,  Yale  University 


CHAPTER  I. 
THE  NATURE  OF  QUASI-CONTRACTUAL  OBLIGATIONS. 

§  1.  Historical  connection  of  quasi-contract  with 
forms  of  pleading.  Fully  to  explain  the  subject  of  this 
chapter  it  will  be  necessary  first  briefly  to  review  some 
of  the  fundamental  principles  of  the  common  law  system 
of  pleading.  See  also  the  article  on  Common  Law  Plead- 
ing in  Volume  XI  of  this  work.  Under  that  system  a 
plaintiff,  in  stating  his  case  to  the  court  and  to  his  op- 
ponent, had  to  use  the  appropriate  form  of  action.  That 
is  to  say,  all  legal  wrongs  were  for  the  purposes  of  plead- 
ing divided  into  a  number  of  distinct  classes,  and  in  each 
class  there  was  an  appropriate  form  of  stating  the  case 

160 


QUASI-CONTRACTS  161 

to  the  court  which  the  plaintiff  was  obliged  to  use.  Some 
of  these  forms  were  developed  at  a  much  later  period 
than  others  and  one  of  the  last  to  be  developed  was  the 
action  of  assumpsit,  which  received  its  name  from  the 
Latin  words  in  the  declaration,  "super  se  assumpsit," 
meaning  he  undertook  or  promised.     This  action  of  as- 
sumpsit was   subdivided  into   two  classes,   special  and 
general.    It  is  with  the  latter  action  that  we  have  chiefly 
to  deal  in  connection  with  the  subject  of  quasi-contracts. 
The  term  ''quasi-contract"  translated  into  plain  Eng- 
lish, means  ''as  if  a  contract" — something  like  a  contract, 
and  yet  not  one.    Only  by  a  consideration  of  the  form 
of  pleading  can  a  clear  understanding  be  had  of  why  the 
obligation  we  have  to  deal  with  here  received  the  name 
of  "quasi-contract."     The  action  of  special  assumpsit 
was  the  form  of  action  for  the  enforcement  of  simple 
contracts,  that  is,  legally  enforceable  promises  which  were 
not  under  seal.     Before  the  development  of  general  as- 
sumpsit, there  was  a  form  of  action  known  as  "debt" 
which  lay  for  the  enforcement  of  any  duty  to  pay  a  sum 
of  money  which  was  definite  and  certain.     There  were 
connected  with  the  action  of  debt  certain  procedural  dis- 
advantages which  made  it  desirable  to  extend,  so  far  as 
possible,  the  action  of  assumpsit  to  cover  the  cases  to 
which  debt  applied ;  and  this  was  done  by  holding,  first, 
that  if  a  man  had  a  debt  and  a  subsequent  express  prom- 
ise to  pay  the  same,  the  promise  was  legally  enforceable — 
the  debt  was  the  consideration  of  the  promise,  it  was  said. 
The  form  of  declaration  alleged  the  existence  of  the  debt 
and  the  facts  giving  rise  to  it  in  general  terms,  only.    At 


162  QUASI-CONTRACTS 

first,  an  express  promise  to  pay  the  debt,  made  subse- 
quently to  the  origin  of  the  debt,  had  to  be  proved  in 
order  that  assumpsit  might  be  brought.  After  a  time, 
however,  it  was  argued  that  the  law  would  imply  a  prom- 
ise to  pay  the  debt,  and  that  no  express  promise  need 
be  proved.  In  other  words,  the  debt  was  all  that  had 
to  be  proved,  and  the  promise  alleged  in  the  declaration 
in  this  form  of  assumpsit  was  implied  by  the  law.  At 
this  stage,  however,  the  action  of  assumpsit  in  this  form 
was  still  only  a  new  remedy  for  old  rights — a  new  way 
of  enforcing  rights  already  recognized.  The  sum  sought 
to  be  recovered  had  to  be  one  which  could  have  been  re- 
covered in  the  old  action  of  debt. 

§  2.  Its  extension  by  Lord  Mansfield.  It  remained  for 
Lord  Mansfield,  borrowing  to  a  large  extent  from  the 
Roman  law,  to  extend  the  action  to  cover  a  whole  new 
field,  and  thus  to  create  a  new  branch  of  the  law — a  new 
set  of  rights  under  a  pretense  of  simply  determining 
whether  the  plaintiff  could  use  a  new  form  of  action.  In 
1760,  in  the  celebrated  case  of  Moses  v.  Maeferlan  (I), 
Lord  Mansfield  said;  *'The  first  objection  is  that  the 
action  of  debt  would  not  lie  here  and  no  assumpsit  could 
lie  where  an  action  of  debt  might  not  be  brought.  .  .  . 
But  there  is  no  foundation  for  it.  .  .  .  If  the  de- 
fendant be  under  an  obligation,  from  the  ties  of  natural 
justice,  to  refund,  the  law  implies  the  debt,  and  gives 
this  action,  founded  on  the  equity  of  the  plaintiff's  case, 
as  it  were  upon  a  contract  ('quasi  ex  contractu'  as  the 
Roman  law  expresses  it)/*    In  other  words,  says  Lord 


(1)     2  Burr.  1005. 


QUASI-CONTRACTS  163 

Mansfield,  not  only  may  the  action  be  used  for  the  previ- 
ously recognized  cases,  but  wherever,  according  to  natural 
justice  and  natural  equity,  a  person  ought  to  pay  a  sum 
of  money  to  another  person,  the  law  imposes  a  duty  upon 
him  to  do  so;  and  in  addition,  in  order  to  compel  the 
performance  of  the  duty,  tlie  law  implies  a  fictitious  prom- 
ise to  do  so,  so  that  the  action  of  assumpsit  may  be 
brought  for  the  breach  of  the  fictitious  or  implied  promise. 

It  is  with  these  obligations  to  pay  money,  arising,  not 
because  the  plaintiff  has  received  the  defendant's  prom- 
ise to  pay,  but  because,  on  certain  principles  of  justice 
and  equity,  the  court  decides  the  defendant  ought  to  do 
so,  that  we  have  to  do  in  this  portion  of  this  work.  These 
obligations  in  the  common  law  system  of  pleading  were 
enforced  as  if  they  were  contracts,  by  an  action  of  as- 
sumpsit, and  were  called,  by  the  older  generation  of  law- 
yers, and  to  a  large  extent  are  still  called,  "contracts 
implied  in  law,"  meaning  that  the  promise  to  pay  is  im- 
plied, or  better,  constructed,  by  the  court  from  the  facts 
of  the  case,  and  does  not,  in  fact,  exist. 

§  3.  Quasi-contracts  distinguished  from  true  contracts. 
The  fundamental  distinction,  then,  between  a  true  con- 
tract and  a  quasi-contract,  lies  in  the  fact  that  in  the 
latter  case,  the  defendant  is  bound  to  pay  because,  in 
the  eyes  of  the  court,  he  ought  to  do  so,  according  to 
the  principles  of  natural  justice  and  equity  as  seen  by 
the  court,  while  in  the  former  he  is  bound  to  do  so  be- 
cause he  has  agreed  to  do  so.  At  this  point  we  must 
guard  ourselves  against  confusing  two  things,  which  have 
often  been  carelessly  mistaken  for  each  other.     In  all 


164  QUASI-CONTRACTS 

the  older  books  upon  contracts  and  pleading,  one  will 
find  contracts  divided,  first,  into  two  main  classes:  (1) 
express;  and,  (2)  implied,  and  the  latter  class  subdivided 
into  two  sub-classes,  (a)  contnu-ts  implied  in  I'act  and 
(b)  contracts  imi)lied  in  law.  As  we  have  already  seen, 
this  latter  class  are  not  true  contracts,  but  are  (juasi- 
contracts.  What  are  the  second  class — contracts  implied 
in  fact?  A  concrete  illustration  will  do  more  perhajxs 
to  answer  this  question  than  any  general  definition.  Sup- 
pose I  go  into  my  gro<*er's  and  simply  say,  "Send  up 
a  biLshel  of  j^otatoos,"  and  walk  out,  and  the  grocer 
sends  them.  Here  1  have  actual!}'  promised  to  pay  the 
price  of  a  bushel  of  potatoes,  not  by  word  of  mouth,  but 
by  my  acts;  and  acts,  in  this  case,  speak  at  least  as 
loudly  as  words.  I  have  in  fact  made  a  promise;  that 
is,  the  grocer,  as  a  reasonable  man,  is  justified  in  in- 
ferring that  that  is  what  I  mean.  I  am  therefore,  in 
such  a  case  bound  to  pay  the  grocer  because  I  have  in 
fact  agreed  to  do  so;  that  is,  I  am  bound  by  the  con- 
tract. The  express  contract,  therefore,  is  a  legally  en- 
forceable promise  made  in  words;  a  contract  implied 
in  fact  is  also  a  legally  enforceable  promise,  expressed, 
however,  by  acts,  but  none  the  less  a  true  promise.  The 
"contract  implied  in  law,"  as  we  have  seen,  is  based 
not  upon  an  actual  promise  made  by  one  person  to  an- 
other, but  upon  a  fictitious  or  constructive  promise 
which  for  the  purpose  of  pleading,  the  law  implies  in 
order  to  permit  the  action  of  assumpsit  to  be  used,  to 
enforce  the  duty  to  pay  which  the  law  imposes  upon  the 
defendant.    It  seems  better  therefore  to  drop  out  from 


QUASI-CONTRACTS  165 

the  subject  of  contracts  altogether  these  so-called  "con- 
tracts implied  in  law,"  and  to  give  them  a  separate  name 
which  indicates  that  while  they  are  not  contracts  but 
obligations  imposed  by  law,  they  are  enforced  as  though 
they  were  contracts. 

§  4.  Definition  of  quasi-contract.  In  the  quotation 
from  Lord  ^lansfield  given  above,  it  will  be  noticed  that 
he  used  in  reference  to  these  obligations  the  Roman  law 
term  ** quasi  ex  contractu,"  (as  if  from  a  contract).  It 
is  by  adopting  the  suggestion  therein  contained  that 
modem  authors  have  come  to  use  the  term  "quasi-con- 
tract. ' '  Many  objections  have  been  made  to  this  name  for 
reasons  which  cannot  be  given  here,  but  it  is  now  gen- 
erally accepted,  especially  by  recent  writers,  and  will 
be  used  in  this  article.  Some  writers  have  suggested 
as  a  better  name,  the  phrase  "constructive  contracts," 
on  the  ground  that  the  promise  for  the  breach  of  which 
the  plaintiff  sues,  is  in  reality  constructed  by  the  court 
from  the  facts  which  show  that  the  defendant  ought  to 
pay  the  sum  to  the  plaintiff,  but  this  suggestion  has  not, 
to  any  extent,  been  acted  upon. 

For  the  purposes  of  this  work,  then,  we  may  describe, 
if  not  define,  quasi-contracts  as  including  all  duties  to 
pay  monej'  to  others  which  arise,  not  because  of  an  agree- 
ment to  do  so,  but  because  the  law  imposes  the  duty  upon 
the  defendant.  The  aim  of  our  discussion,  therefore, 
must  be  to  determine  the  cases  in  which,  and  the  prin- 
ciples upon  which,  our  system  of  law  imposes  upon  per- 
sons these  duties  to  pay  money  to  other  persons. 

§  5.    A  record  gives  rise  to  a  quasi-contract.    One  of 

Vol.  1—16 


166  QUASI-CONTRACTS 

the  earliest  examples  of  what  is;  proixTly  called  a  quasi- 
contractual   duty   arises  when   a  judgment   is   rendered 
by  a  court  of  c>ommon  law  against  the  defendant  in  an 
action.    The  entry  of  the  judgment  determines  that  there 
is  a  legal  duty  on  the  part  of  the  defendant  to  pay  the 
plaintiff  a  sum  of  money,  the  amount  of  the  judgment. 
This  is  tme,  irrespective  of  the  nature  of  the  action  for 
which  the  judgment  is  recovered;    that  is,  whether  the 
action  he  one  for  damages  for  a  breach  of  an  actuiU  con- 
tract, or  for  damages  arising  from  a  tort  of  any  kind. 
This  duty  arises,  therefore,  not  because  the  defendant 
has  promised  the  plaintifT  in  any  way  to  pay  the  sum,  hut 
simply  because  the  court  has  determined  that  he  ought 
to  do  so.    An  obligation  of  this  kind  clearly  answers  our 
description  of  a  quasi-contract,  and  is  so  classified.    For- 
merly, in  accordance  with  the  classification  given  above, 
it  was  described  as  a  contract  implied  in  law,  or  more 
specifically,  a  "contract  of  record." 

§  6.  A  statutory  duty  may  give  rise  to  a  quasi-contraxit. 
It  sometimes  happens  that  a  statute  passed  by  a  legis- 
lative body  imposes  a  duty  upon  one  man  to  pay  a  sum 
of  money  to  another  man,  although  he  has  not  agreed 
to  do  so.  In  such  a  ease  the  resulting  duty  must,  ac- 
cording to  our  description  of  quasi-contracts,  be  classed 
as  a  quasi-contract.  For  example,  it  is  not  unusual  for 
statutes  to  require  the  master  of  a  vessel  to  accept  the 
services  of  the  first  pilot  who  offers  his  services,  and  to 
provide  that,  in  case  the  master  refuses  the  services  of 
the  pilot  who  so  offers  himself,  he  shall  pay  the  pilot 
for  his  services  as  if  they  had  been  rendered.    In  a  case 


QUASI-CONTRACTS  167 

of  this  kind,  therefore,  the  action  of  the  pilot  against  the 
master  to  recover  for  the  services  which  were  not  ren- 
dered but  only  tendered  is  based  upon  a  quasi-con- 
tract (2). 

§  7.  An  official  duty  may  give  rise  to  a  quasi-contract. 
In  certain  cases  a  public  oflicer  in  the  discharge  of  his 
duty  is  bound  by  the  law  to  pay  over  a  sum  of  money 
to  another  person,  and  here  again  we  have  a  duty  to 
pay  money  imposed  by  law,  that  is,  a  quasi-contractual 
obligation.  For  example,  in  the  case  of  King  v.  Moore 
(3),  the  defendant  King  was  a  sheriff  who  had  levied 
upon  and  sold  property  of  one-  Lewis  under  an  execution. 
After  paying  the  amount  of  the  judgment  to  the  judgment 
creditors  out  of  the  proceeds,  he  had  left  a  balance.  It 
was  held  that  he  was  under  an  official  duty  to  pay  this 
balance  over  to  the  judgment  debtor,  the  quasi-contrac- 
tual duty  arising  from  his  official  position. 

§  8.  Unjust  enrichment  the  basis  of  most  quasi-con- 
tracts. The  most  important  and  by  far  the  largest  class 
of  cases  which  fall  under  our  subject  are  those  in  which 
the  duty  to  pay  is  based  upon  Lord  Mansfield's  famous 
principle  that  wherever,  according  to  the  principles  of 
natural  justice  and  equity  (ex  aequo  et  bono)  the  de- 
fendant ought  to  pay,  the  law  imposes  a  duty  to  pay. 
This  principle  is  stated  by  Professor  Keener,  the  first 
writer  who  published  a  treatise  on  this  subject,  as  fol- 
lows: **No  one  shall  be  allowed  to  enrich  himself  un- 
justly at  the  expense  of  another."    Obviously  the  state- 


(2)  The  Francisco  Garguilo,  14  Fed.  495. 

(3)  6  Ala.  160. 


168  QUASI-CONTRACTS 

ment  of  such  a  veiy  general  and  abstract  principle  does 
not  take  us  veiy  far,  and  we  must  therefore  proceed  to 
discover  from  the  cases  decided  by  the  courts  what  has 
been  held  to  be  and  what  has  been  held  not  to  be  an  un- 
just enrichment  of  one  man  at  the  expense  of  another. 
In  doing  so  we  shall  discover  certain  limitations  upon 
the  principle  which  really  allow  one  to  enrich  himself 
unjustly  at  another's  expense  in  certain  ways,  the  court 
refusing  the  plaintiff  relief,  in  spite  of  the  unjust  enrich- 
ment, because  of  some  real  or  fancied  demand  of  public 
policy,  or  for  some  other  reasons  which  will  be  set  forth 
later.  Let  us  then  proceed  to  the  application  of  the  gen- 
eral principle  as  we  find  it  in  the  cases. 


CHAPTER  II. 

WAIVER  OF  TORT. 

§  9.    Meaning  of  '  *  waiving  the  tort. ' '    We  can  best  ap- 
proach the  discussion  of  the  branch  of  the  subject  which 
will  be  dealt  with  in  this  chapter  by  considering  a  con- 
crete case.    Suppose  B  takes  A's  horse  without  A's  per- 
mission, and  carries  him  off  and  sells  him.    B  is  said 
to  have  converted  A's  horse,  that  is,  to  have  committed 
the  tort  or  wrong  known  as  a  conversion.    A  may  there- 
fore sue  B  in  the  appropriate  common-law  form  of  action 
for  the  redress  of  such  a  wrong,  namely,  the  action  of 
trover.     The  wrong,  from  the  point  of  view  of  the  tort 
action,  consists  in  the  unlawful  assumption  of  dominion 
by  B  over  A's  chattel,  and  the  amount  of  A's  recovery  is 
the  damage  which  has  been  inflicted  upon  him  by  this 
wrongful  act  of  B.     Upon  examining    the    transaction, 
however,  we  discover  that  in  addition  to  the  tort,  that 
is  in  addition  to  the  loss  inflicted  on  A  by  B's  wrongful 
act,  we  can  discover  a  different  relationship  in  the  case 
supposed;  that  is  to  say,  we  may  look  at  it  from  a  differ- 
ent point  of  view.    Not  only  has  B  inflicted  a  loss  upon 
A,  but  B  has  enriched  himself  by  the  amount  he  has  re- 
ceived from  the  sale  of  A's  horse.    This  enrichment  cer- 
tainly is  an  unjust  one.     If  then,  our  principle  that  no 
man  shall  unjustly  enrich  himself  at  another's  expense 

169 


170  QUASI-CONTRACTS 

be  of  universal  applicability,  we  have  here  the  basis  for 
a  quasi-contractual  obligation,  that  is,  a  duty  impose<J 
upon  B  to  pay  A  a  sum  of  money  equal  in  amount  to  the 
cnriehmont  whioh  he  has  unjustly  receive<^l  at  A's  ex- 
pense. We  shall  expect  therefore,  in  accordance  with 
the  view  expressed  by  Lord  Mansfield  in  the  case  of 
Moses  V.  Macferlan,  above  referred  to  (1),  that  A  could 
maintain  an  action  of  general  assumpsit  against  H,  and 
such  18  the  law.  The  form  of  the  declaration  in  such  a 
case,  at  common  law,  would  allege  that  the  defendant 

B  was  indebted  to  the  plaintifT  A  in  the  sum  of  $ 

(stating  the  amount  received  by  the  defendant  for  the 
horse)  theretofore  had  and  received  by  the  defendant  to 
the  use  of  the  plaintifT,  and  being  so  indebted,  the  de- 
fendant promised  to  pay  the  said  sura  to  the  plaintiff  on 
request,  and  that  he  has  not  done  so.  This  form  of  the 
declaration  in  general  assumpsit  is  known  as  the  count 
for  money  had  and  received,  and  is  perhaps  the  form 
used  more  than  any  other  for  the  enforcement  of  quasi- 
contractual  obligations.  When  the  plaintifT  brings  an 
action  of  assumpsit,  in  cases  of  this  kind,  instead  of  suing 
in  trover  for  the  conversion,  he  is  said  to  "waive  the 
tort  and  sue  in  assumpsit."  This  phrase,  however,  is 
not  strictly  accurate,  for  as  a  matter  of  fact  the  plain- 
tifT simply  chooses  to  look  at  the  transaction  from  the 
point  of  view  of  the  unjust  enrichment,  instead  of  from 
the  point  of  view  of  the  loss  inflicted  upon  him  by  the 
defendant's  act.  In  other  words,  the  plaintiff  has  his 
election  to  adopt  either  point  of  view,  and  therefore  to 

(1)     §  2,  above. 


QUASI-CONTRACTS  HI 

elect  between  two  different  remedies.  It  may  with  equal 
truth  be  said,  when  the  plaintiff  in  such  a  case  sues  in 
trover,  that  he  waives  the  assumpsit  and  sues  in  tort  for 
the  conversion. 

§  10.    Conversion  and  sale.     Measure  of  recovery  is 
amount  received.      Let  us  now  examine  our  case  a  little 
more  closely.      Suppose  the  horse  so  taken  by  B  was 
worth  in  the  market  $100,  but  that  B,  being  a  sharp  bar- 
gainer, received  for  him  more  than  that,  say  $150.     In 
a  suit  by  A  against  B,  in  trover  for  the  conversion  of  the 
horse,  the  measure  of  damages  would    be    the    market 
value,  $100.    Suppose  now  instead  of  suing  in  trover,  A 
waives  the  tort  and  sues  in  assumpsit  for  money  had  and 
rec-eived.    How  much  will  he  recover!    According  to  the 
decisions  of  the  courts,  he  will  be  entitled  to  recover  the 
amount  which  B  received,  be  it  more  or  less  than  the 
market  value  of  the  horse.     That  is  to  say,  in  the  case 
supposed,  he  will  recover  $150.     ^^^lat  is  the  principle 
back  of  this!    The  real  question  involved  is,  what  is  the 
amount  of  the  unjust  enrichment  which  B  has  obtained 
at  the  expense  of  A?    Is  it  $100,  or  150?    The  view  which 
the  courts  have  taken  is  this :    The  $150  is  the  substitute 
for  the  horse  and  it  would  not  be    just  to  allow  the  de- 
fendant to  take  the  plaintiff's  property,  sell  it,  and  re- 
tain any  of  the  proceeds  of  the  same.    They  accordingly 
hold  that  the  measure  of  damage  in  the  assumpsit  action 
is  the  amount  actually  received  for  the  plaintiff's  prop- 
erty by  the  defendant.    This  rule,  it  will  be  noticed,  works 
both  ways.    For  example,  if  the  defendant  received  only 
$75  for  the  horse,  although  he  was  worth  $100,  and  the 


172  QUASI-CONTRACTS 

plaintiff  were  to  bring  nu  action  for  money  had  and  re- 
ceived, all  that  he  could  recover  would  he  $75. 

ij  11.  The  quasi-contract  arises  when  the  money  is  re- 
ceived. Statute  of  limitations.  The  action  then  in  this 
class  of  cases  is  brought  upon  the  theor\'  that  the  money 
received  by  the  defendant  is  received  in  exchange  tor 
tlie  |)laintifT's  j)r()j)erty  and  in  equity  should  be  paid  to 
tlie  plaintilT.  It  follows  from  this  that  the  right  to  bring 
an  action  I'ur  money  had  and  received  does  not  accrue 
to  the  plaintiff  until  the  defendant  has  sold  the  property 
and  received  the  money  for  it,  the  wrongful  act  for  which 
the  action  of  assumpsit  is  brought  in  this  case  being  tlie 
failure  of  defendant  to  i)ay  to  the  i)laintiff  tlu»  money 
thus  received.  This  fact  has  an  important  bearing  upon 
the  running  of  the  statute  of  limitations.  For  example, 
if  we  suppose  that  the  sale  by  the  defendant  and  the 
receipt  of  the  money  does  not  take  place  until  two  or 
three  years  after  the  original  conversion,  the  action  for 
money  had  and  received  does  not  accrue  until  the  receipt 
of  the  money.  According  to  the  general  principles  cover- 
ing the  application  of  the  statute  of  limitations,  the  time 
for  the  running  of  the  statute  is  computed  from  the  date 
upon  which  the  plaintiff's  right  of  action  accrued,  which 
in  the  case  supposed,  is  two  or  three  years  after  the  con- 
version. The  result  is  that  very  frequently  the  action 
in  tort  for  the  conversion  will  be  barred  by  the  statute 
of  limitations,  while  the  action  for  money  had  and  re- 
ceived, not  having  accrued  until  much  later,  will  not  be 
barred  for  a  much  longer  period. 

Suppose  now  that  the  defendant  B  appropriated  the 


QUASI-CONTRACTS  173 

property  of  A,  the  plaintiff,  and  retained  the  same  for 
so  long  a  period  that  A,  because  of  the  running  of  the 
statute  of  limitations,  lost  all  right  to  recover  the  prop- 
erty from  the  defendant  in  an  action  of  replevin  or  some 
similar  action.     Suppose  further  that  after  this  the  de- 
fendant sells  the  property  in  question  and  receives  money 
for  the  same.     Could  A  maintain  an  action  for  money 
liad  and  received  under  those  circumstances?     The  an- 
swer to  this  depends  on  whether  A,  the  plaintiff,  after 
the  statute  had  barred  his  action  of  replevin,  still  re- 
tained any  title  to  the  property;    because,  if  the  effect 
of  the  running  of  the  statute  and  the  consequent  barring 
of  the  replevin  action  is  to  vest  the  title  to  the  property 
in  the  defendant,  it  would  follow  that  when  the  defendant 
later  sold  the  property  he  was  selling  his  own  property, 
and  the  money  received  would  be  the  price,  not  of  the 
plaintiff's  i)roperty,  but  of  the  defendant's  property,  and 
so  no  action  for  money  had  and  received  would  lie.    This 
is  the  view  which  the  courts  have  taken  of  this  question. 
They  hold  that  the  effect  of  the  statute  of  limitations 
when  it  bars  all  actions  for  the  recovery  of  specific  prop- 
erty, is  to  vest  the  title  to  that  property  in  the  defend- 
ant, and  that  therefore  a  sale  later  is  simply  a  sale  by 
the  defendant  of  his  own  property,  and  gives  rise  to  no 
quasi-contractual  obligation. 

§  12.  Money  or  its  equivalent  must  be  received.  If  the 
defendant  appropriates  the  plaintiff's  property  and  ex- 
changes the  same  for  other  property,  clearly  the  de- 
fendant has  not  received  money  for  the  use  of  the  plain- 
tiff, and  so  a  count  for  money  had  and  received  will  not 


174  QUASI-CONTRACTS 

be  supported.  As  there  never  was  developed  any  form 
of  doelaration  in  assumpsit  to  cover  the  receipt  of  any- 
thing to  the  use  of  tlie  phiintiff  except  money,  it  follows 
that  no  quasi-contractual  action  can  be  maintained  in  such 
a  case,  although  of  course  there  is  an  unjust  enrichment 
at  the  exf>ense  of  the  plaintiff,  as  much  as  in  tiie  case 
where  money  is  received  instead  of  property.  The  reader, 
however,  is  referred  ujwn  this  \yo\ut  U)  tlie  article 
upon  Trusts  in  Vohiinc  VI  of  this  work,  in  \vlii;'li  lie 
will  Icani  tiiat  in  such  a  case  the  plaintiff'  couhl  i)y  a  i)iil 
in  c(iuity  hold  the  defendant  as  a  constructive  trustee 
of  the  new  property  received  in  exchange  for  the  old, 
and  would  therefore  be  entitled  to  a  decree  from  the 
court  of  equity,  directing  the  defendant  to  transfer  to 
the  plaintiff  this  new  property;  a  result  reached  by  the 
court  of  equity  upon  exactly  the  same  principles  as  those 
ui>on  which  the  court  of  law  has  proceeded  in  the  case 
which  we  liave  just  been  discussing.  It  should  be  noted 
also  that  if  the  defendant  was  entitled  to  receive  money 
in  exchange  for  the  plaintiff's  property,  and  in  place  of 
that,  accepted  property,  the  property  so  received  is 
held  to  be  the  equivalent  of  money,  and  the  plaintiff  is 
accordingly  entitled  to  bring  an  action  for  money  had 
and  received.  For  example,  in  Miller  v.  Miller  (2)  the 
defendant  bought  certain  wood  belonging  to  the  plain- 
tiff and  sold  the  same  under  a  contract  entitling  him 
to  receive  money,  but  finally  took  in  part  payment  for  the 
same  some  real  estate  which  he  still  held.  It  was  de- 
cided that  an  action  for  money  had  and  received  for  the 


(2)     7  Pick.  (Mass.)  133. 


QUASI-CONTRACTS  175 

whole  promised  price  would  lie,  on  the  ground  that  he 
had  received  the  equivalent  of  money.  Had,  however, 
the  transaction  been  that  the  defendant  exchanged  the 
wood  directly  for  real  estate,  never  being  entitled  to 
money,  a  count  for  money  had  and  received  could  not 
have  been  sustained. 

§  13.  Conversion  and  no  sale:  May  tort  be  waived? 
Returning  now  to  the  case  in  which  B  appropriated  A's 
horse,  let  us  modify  the  case  by  supposing  that  B  in- 
stead of  selling  the  horse  kept  him  for  his  own  use. 
This  of  course  is  equally  a  conversion.  May  A,  the  owner 
of  the  horse,  in  a  case  of  this  kind,  waive  the  tort 
and  sue  in  assumpsit,  or  is  his  sole  remedy  the  tort  action 
for  damages!  Before  we  can  answer  this  question,  we 
must  examine  the  forms  of  declaration  in  general  as- 
sumpsit, and  see  if  there  b*.  any  form  which  could  cover 
the  ease.  On  doing  so,  we  find  only  one  that  could  by 
any  possibility  apply,  namely,  the  count  for  ''goods  sold 
and  delivered."  In  this  fonn  of  the  declaration  the  alle- 
gations would  be  that  the  defendant  was  indebted  to  plain- 
tiff for  one  horse  theretofore  sold  and  delivered  by 
plaintiff  to  the  defendant,  and  being  so  indebted  the 
defendant  promised  to  pay  the  said  sum  to  the  plaintiff 
on  request,  and  that  he  had  not  done  so.  Remember- 
ing now  that  the  declaration  in  general  assumpsit  is  not 
to  be  taken  at  ite  fa<;«  value,  but  that  the  promise  al- 
leged in  any  event  is  a  fiction,  does  this  form  of  declara- 
tion mean  that  an  actual  sale  was  made?  Let  us  go  back 
a  moment  to  the  case  of  the  action  for  money  had  and  re- 
ceived, if  B  had  sold  the  horse.    The  declaration  there 


176  QUAiSl-CON  TRACTS 

says  that  there  was  money  had  and  received  by  the  de- 
fendant to  tiic  use  of  the  plaintitY.  Now  the  evidence 
would  sliow  that  the  defendant  received  the  money 
actually  for  his  own  use.  That  is,  that  was  his  intention, 
and  (lie  assertion  that  it  was  to  the  use  of  the  plaintiff  is 
the  result  of  a  rule  that  the  law  makes  it  his  duty  to  pay  it 
to  the  plaiutilT.  May  not  the  law  say,  in  the  case  where 
he  keeps  a  horse  instead  of  selling  it,  that  the  owner 
may  treat  it  as  a  fictitious  sale  and  compel  him  by  an 
action  of  assumpsit  for  one  horse  sold  and  delivered  to 
pay  the  value  of  the  horse,  as  though  there  had  been  a 
sale?  Or,  putting  it  shortly,  may  he  not  be  sued  on  a 
constructive  or  fictitious  sale! 

55  14.  Same:  Illustrations.  Upon  this  question  thp. 
authorities  are  unfortunately  divided.  Tn  the  English 
case  of  Kussell  v.  Bell  (3)  he  court  allowed  an  action 
of  this  kind,  Lord  Abinger  saying  in  the  course  of  his 
opinion:  *'If  a  stranger  takes  my  goods  no  doubt  a 
contract  may  be  implied  and  I  may  bring  an  action, 
either  of  trover  for  them,  or  of  assumpsit.  This  is  a 
declaration  framed  on  a  contract  implied  by  law.  Where 
a  man  gets  hold  of  goods  without  any  actual  contract, 
the  law  allows  the  owner  to  bring  assumpsit.'*  In  the 
early  Massachusetts  case  of  Jones  v.  Hoar  (4)  the 
court  refused  to  allow  the  action,  saying:  **The  whole 
extent  of  the  doctrine,  as  gathered  from  the  books, 
seems  to  be  that  one  whose  goods  have  been  taken  from 
him  or  detained  unlawfully,  whereby  he  has  a  right  to 


(3)  10  M.  &  W.  340. 

(4)  5  Pick.  (Mass.)  285. 


QUASI-CONTRACTS  177 

an  action  of  trespass  or  trover,  may,  if  the  wrongdoer 
sell  the  goods  and  receive  the  money,  waive  the  tort, 
affirm  the  sale,  and  have  an  action  for  money  had  and 
received  for  the  proceeds."  So  in  the  case  of  Watson  v. 
Stever  (5)  the  same  conclusion  is  reached,  the  court, 
speaking  through  Mr.  Justice  Cooley,  saying:  "If  one 
has  taken  ix)ssession  of  property  and  sold  or  disposed 
of  it,  and  receive  money  or  money's  worth  therefor, 
the  owner  is  not  comi)ellable  to  treat  him  as  a  wrong- 
doer, but  may  affirm  the  sale,  as  made  on  his  behalf, 
and  demand  in  this  form  of  action  the  benefits  of  the 
transaction.  J  Jut  we  cannot  safely  say  the  law  will  go 
very  much  further  than  this  in  implying  a  promise, 
where  the  circumstances  repel  all  implications  of  a 
promise  in  fact." 

§  15.  Same:  Conclusion.  It  is  apparent  that  in  lioth 
of  these  cases  the  court  misconceived  the  basis  of  the 
action  for  money  had  and  received  where  the  defendant 
has  sold  the  converted  goods.  Api)arently  it  is  thought 
that  in  some  way  a  promise  in  fact  can  be  found;  that 
by  choosing  to  waive  the  tort  and  sue  in  assumpsit  the 
plaintiff  has  in  some  mysterious  way  affirmed  the  sale 
so  that  it  was  in  fact  made  with  his  consent  from  the  be- 
ginning as  though  the  defendant  had  been  his  agent. 
It  is  however  well  recognized  today  that  such  is  not  the 
case,  but,  as  we  have  seen,  that  the  principle  involved 
is  that  the  money  received  is  an  unjust  enrichment  of  the 
defendant  at  the  expense  of  the  plaintiff.  In  both  the 
case  where  the  property  is  sold  for  money,  and  in  the 


(5)     25  Mich.  386. 


178  QUASI-CONTRACTS 

case  where  it  is  retained  by  the  tort-feasor,  the  cii-cum- 
staneos  ropol  all  implications  of  a  promise  in  fact  and 
in  both  cases  it  is  true  that  the  defendant  lias  unjustly 
enriched  himself  at  the  expense  of  the  plaintiff.  In 
many,  and  perhaps  a  majority,  of  the  American  states 
which  have  passed  upon  the  question,  the  action  for 
goods  sold  and  delivered  in  the  cases  with  which  we  are 
dealing,  is  allowed.  For  example,  in  Walker  v.  Diuiran 
(6)  the  i)laintitT  alleged  a  sale  and  delivery  by  the  i)lain- 
tifT  to  the  defendant  of  250,000  feet  of  lumber,  and  that 
the  defenihmts  had  not  paid  for  the  same.  At  the  trial, 
all  the  plaintiff  proved  was  that  the  defendants  had 
wrongfully  appropriated  logs  belonging  to  the  plaintitT. 
The  con  It  held  that  the  plaintiff  had  proved  the  allega- 
tions of  his  complaint,  and  that  under  the  circumstances 
of  the  case  the  plaintiff  had  the  riglit  to  waive  the  tort 
and  sue  in  assumpsit  on  the  ** contract  implied  by  law," 
if  he  so  wished. 

§  16.  Recovery  in  quasi-contract  for  use  of  personal 
property.  In  the  cases  thus  far  considered  of  the  appro- 
priation of  property,  we  have  assumed  that  the  defen- 
dant appropriated  the  entire  property.  Suppose  now 
that  instead  of  doing  this  the  defendant  simply  appro- 
priated the  use  of  the  property  for  a  certain  limited 
period.  For  example,  in  the  case  of  Fanson  v.  Linsley  (7) 
it  appeared  that  the  defendant  had,  without  the  permis- 
sion of  the  plaintiff,  taken  a  steam  threshing  machine 
owned  by  the  plaintiff  and  used  the  same  for  a  period 

(6)  68  Wis.  624. 

(7)  20  Kan.  235. 


QUASI-CONTRACTS  179 

of  three  days.    In  doing  so  be  had  injured  the  machine 
so  that  the  plaintiff  expended  $15  in  having  it  repaired. 
In  addition  the  plaintiff  expended  $12  in  bringing  the 
machine  back  to  the  plaintiff's  farm,  the  defendant  not 
having  returaed  the  same  when  he  was  through  with  it. 
It  was  found  that  the  reasonable  value  of  the  use  of  the 
machine  was  $15  per  day  or  $45  for  the  three  days.    The 
question  in  the  case  was,  for  which,  if  any,  of  these  three 
items  could   a  quasi-contractual    action   be    maintained. 
The  court,  following  a  dictum  of  Lord  Mansfield  in  an 
earlier  case,  held  that  the  value  of  the  use  of  the  machine 
could  be  recovered  on  the  basis  of  quasi-contractual  obli- 
gation, but  not  the  other  two  items.     The  reason  for  this 
is    obvious.     The   injury    to  the    machine,   although    it 
caused  a  loss  to  the  plaintiff,  did  not  result  in  an  enrich- 
ment of  the  defendant.     So  also  the  expenditure  by  the 
plaintiff  of  the  sum  for  having  the  machine  returned  to 
his  fai-m  was  a  loss  to  the  plaintiff,  but  again  not  an  en- 
richment to  the  defendant.     The  only  enrichment  was  for 
the  use  of  the  machine  for  the  three  days,  and  this  there- 
fore was  the  limit  of  the  plaintiff's  recovery  in  that  form 
of  action.  ' 

§  17.  Same:  Illustrations.  In  McSorley  v.  Faulkner 
(8)  the  plaintiff  sold  his  business  to  the  defendant  and 
vacated  the  office  in  which  he  had  been  carrying  on  the 
same,  the  defendant  taking  possession  of  the  office  and 
carrying  on  the  business.  The  telephone  which  the 
plaintiff  had  agreed  with  the  telephone  company  to  pay 
for  for  one  year  was  left  in  the  office.    Nothing  was  said 


(8)     18  N.  Y.  Supp.  460. 


180  gUASI-CONTRACTS 

between  the  plaintifT  and  the  defendant  when  the  busi- 
ness wa8  sold  about  the  telephone,  and  the  «*ourt  found 
that  it  was  not  the  fair  understanding  of  the  parties  that 
the  use  of  the  telephone  was  transferred  by  the  plaintilT 
to  the  defendant.  Without  the  j)eruii88ion  of  tlie  plain- 
till'  the  dofendaut  used  the  telephone  regularly  iiud  con- 
tinuously fur  a  certain  p<'rio<l.  Upon  distH>vering  tliis 
the  plaintitT,  who  had  had  to  |Kiy  the  telephone  oonipany 
tho  agree<l  rental  of  the  telephone,  brought  an  iution  to 
recover  from  the  defendant  the  reasonable  value  of  the 
use  of  the  telephone  during  the  period  in  question.  It 
was  held  that  the  plaintilT  c<Juld  re<.'over,  and  that  tho 
reasonable  value  was  tlie  amount  whicli  the  plaintifT  had 
iiad  to  j»ay  the  telei)hone  company  for  the  period  in 
question.  Ujmn  the  same  principle  it  is  held  that,  where 
a  person  without  agreeing  to  pay  for  the  same,  succeeds 
in  getting  his  goods  carried  from  one  place  to  another  by 
a  common  carrier  without  paying  for  the  same,  he  is 
under  a  quasi-contractual  duty  to  i)ay  for  the  carriage. 
Similarly,  one  who  infringes  a  patent  and  manufactures 
and  sells  the  patented  article  must,  where  it  is  possible 
to  estimate  them,  account  to  the  owner  for  the  profits  of 
the  infringement. 

§  18.  Recovery  for  use  of  real  property.  In  the  case  of 
real  property  where  the  defendant  has  used  and  occupied 
another  person's  land  wrongfully  and  without  permis- 
sion, no  quasi-contractual  action  can  be  maintained,  for 
reasons  connected  with  the  historical  development  of  this 
action  of  general  assumpsit.  The  count  in  general  as- 
sumpsit for  the  use  and  occupation  of  real  estate,  in 


QUASI-CONTRACTS  181 

other  words,  can  be  sustained  only  in  a  case  where  the  de- 
fendant has  occupied  the  kinds  under  an  actual  agree- 
ment, express  or  implied  in  fact,  to  pay  for  the  same. 
Interesting  questions  arise,  however,  where  the  defend- 
ant has  not  been  in  the  occupation  of  real  property  but 
has  used  it  to  a  certain  extent  without  taking  possession 
of  it.     For  example,  in  the  case  of  Phillips  v.  Ilomfray 
(9)  the  defendants  used,  without  the  owner's  knowledge, 
certain  roads  and   passages  under  the  plaintiff's  farm 
for  the  convenience  of  their  stone  and  iron.     By  doing 
this,  it  was  admitted  that  they  saved  a  considerable  ex- 
pen.se  to  themselves.     The  question  before  the  court  was 
whether  the  defendants  were  under  a  quasi-contractual 
duty  to  pay  the  plaintiff  for  the  use  of  the  underground 
roads  and  passages.    As  the  action  is  not  one  for  the  use 
and  occui)ation  of  real  estate,  the  difficulty  referred  to 
above  does  not  pre\'ent  a  recovery,  but  the  English  court 
held,  one  of  the  judges  dissenting,  that  no  quasi-contrac- 
tual action  would  lie,  on  the  ground  that  "although  the 
defendant  saved  his  estate  expense,  he  did  not  bring  into 
it  any  additional  property  or  value  belonging  to  another 
person,"  and  that  the  principle  of  unjust  enrichment  de- 
manded the  existence  of  both  a  loss  to  the  plaintiff  and 
an  enrichment  of  the  defendant.    It  is  difficult  to  see,  how- 
ever, either  that  the  defendant  received  nothing  or  that 
the  plaintiff  lost  nothing.    As  already  stated,  one  of  the 
judges   dissented   from   the   conclusion   reached,   and  it 
would  seem  that  he  had  the  better  reasoning  upon  his  side. 
The  defendant  had  certainly  used  the  plaintiff's  property; 


(9)     L.  R.  24  Ch.  Dir.  439. 

Vol  1-17 


182  QUASI-CONTRACTS 

he  took,  so  to  speak,  a  right  of  way  under  the  plaintiff's 
land,  and  therefore  had  been  enriched  to  that  extent  at 
the  expense  of  the  plaint itT.  In  certain  American  courts 
it  has  been  held  without  any  difficulty  that  the  defendant 
who  pastures  his  cattle  upon  land  belonging  to  and  in  the 
possession  of  the  plaintiff,  is  subject  to  a  (luasi-contract- 
ual  duty  to  pay  the  owner  of  the  laud  the  reasoni«ble  value 
of  the  ])asturage. 

Ji  19.  Same:  Measure  of  recovery.  It  has  been  sug- 
gested that  in  these  cases  of  the  wrongful  use  of  pro{>erty 
the  amount  which  the  plaintiff  can  recover  is  limited  to 
the  reasonable  value  of  the  use  and  does  not  cover  the 
value  of  the  use  to  the  defendant.  In  other  words,  it  is 
said  that  the  plaintiff'  is  not  entitled  to  recover  the  profit 
which  the  defendant  derived  from  the  use  of  the  plain- 
tiff's property,  but  simply  the  reasonable  value  or  the 
market  value  of  the  use.  It  seems  however  that  this 
cannot  be  the  law.  Let  us  suppose  in  the  case  of  the 
threshing  machine  previously  discussed,  that  the  defend- 
ant, instead  of  using  the  machine,  had  succeeded  in  rent- 
ing it  at  an  unusually  high  rate  for  the  three  days  to 
another  person.  For  example,  suppose  the  reasonable 
or  ordinary  rental  would  be  $15  i->er  day,  but  that  the 
defendant  had  found  some  one  who  had  urgent  need  of 
the  threshing  machine  and  had  obtained  $25  per  day  for 
the  machine.  Would  not  the  $25  that  the  defendant  re- 
ceived for  the  sale  of  the  use  of  the  plaintiff's  property 
be  money  had  and  received  by  the  defendant  to  the  use 
of  the  plaintiff?  If  we  are  to  be  consistent  with  the  deci- 
sions in  cases  where  the  defendant  sells  the  whole  of  the 


QUASI-CONTRACTS  183 

property  for  more  than  it  is  worth,  it  would  seem  that 
here  also  the  plaintiff  is  entitled  to  recover  all  that  the 
defendant  has  received  for  the  sale  of  the  use  of  the 
plaintiff's  property. 

§  20.  Recovery  of  fees  or  saJaxy  of  public  office.  Inter- 
esting questions  arise  in  cases  relating  to  public  office. 
It  happens  not  infrequently  that  the  election  officials  is- 
sue a  certificate  of  election  to  one  person  who  assumes 
the  office,  enters  upon  his  duties,  and  discharges  the  same 
for  a  certain  period,  and  that  in  the  meantime  his  oppo- 
nent, who  claims  to  have  been  elected,  is  contesting  the 
election  in  the  courts  and  is  finally  seated.  Suppose  now 
that  the  person  who  has  been  in  the  possession  of  the 
office,  let  us  say,  for  six  months,  has  performed  all  of  the 
services  for  that  time,  and  has  collected  the  salary  for 
that  six  months.  At  the  end  of  that  time  his  opponent 
obtains  a  judgment  in  the  courts  ousting  his  rival  and 
seating  himself.  Is  the  one  who  has  performed  all  of 
the  services  of  the  office  entitled  to  retain  the  salary 
which  he  collected,  or  is  the  one  who  has  successfully 
asserted  his  rights  to  the  office  entitled  to  demand  the 
same?  Before  we  can  determine  this,  we  must  examine 
the  principles  of  law  governing  the  rights  of  a  public 
officer  to  his  salary.  When  we  do  so  we  discover  that 
ver}'  different  principles  come  into  operation  from  those 
which  obtain  in  ordinaiy  life  in  the  relation  between 
an  employer  and  an  employee.  Our  law  views  the  salary 
as  an  incident  to  the  office,  and  not  as  payment  for  the 
performance  of  the  services.  For  example,  it  has  been 
held  in  a  number  of  cases  that  where  a  public  officer  is 


184  QUASI-CONTRACTS 

illegally  prevented  by  his  superior  officer  from  perform- 
ing the  duties  of  the  office,  he  is  entitled  to  the  salary  lor 
the  period  in  question,  although  he  has  performed  abso- 
lutely no  services,  and  it  is  also  held  (coutrarj-  to  the 
rule  wliich  would  obtain  between  employer  and  employee 
in   a   similar  case)    that   any   money   which    the   jniblic 
official  has  earned  in  the  meantime  elsewhere  is  not  to 
be  deducted  from  the  amount  of  his  salary.     In  other 
words,  the  one  who  has  the  title  to  the  office,  it  is  held, 
has  the  right  to  the  salary.     In  our  case  therefore,  the 
case  seems  to  be  this:     The  one  who  was  in  office  and 
performed  the  sen-ices  did  not  have  the  title  to  the  office. 
The  fact  that  he  performe<l  the  services,  therefore,  does 
not  entitle  him  to  the  salary.     The  one  who  was  out  of 
office  had  the  title  to  the  office  and  therefore  the  right  to 
the  salary.    The  conclusion   reached,   then,  is  that  the 
money  received  by  the  one  who  performed  the  service,  of 
right  should  be  paid  to  the  one  who  had  the  title  to  the 
office,  and  it  is  accordingly  held  that  the  rightful  claimant 
to  the  office  is  entitled  to  recover  from  the  other  i^arty  the 
salary  received.    See  Public  Officers,  Chapter  VI,  in  Vol- 
ume IX  of  this  work. 

§  21.  Recovery  for  services  illegally  obtained.  In  Pat- 
terson V.  Prior  (10)  the  plaintiff  was  convicted  and  sent 
to  jail  by  a  court  which  had  no  jurisdiction,  so  that  his 
imprisonment  was  unlawful,  and  he  was  subsequently  re- 
leased on  a  writ  of  habeas  coi-pus.  The  defendant  Pat- 
terson was  lessee  of  the  penitentiary  and  received  all 
the  benefit  of  the   work   and   labor   wliich    the  plaintiff 

(10)     18  Ind.  440. 


QUASI-CONTRACTS  185^ 

was  obliged  to  do.    The  defendant  Miller  was  the  war- 
den of  the  prison  and,  it  was  assumed  by  the  court,  was 
liable  to  the  plaintiff  in  a  tort  action  for  false  imprison- 
ment.    The  plaintiff,  after  his  release,  brought  an  ac- 
tion to  recover  from  Patterson  and  Miller  the  value  of 
his  services  thus  rendered  under  compulsion.    The  court 
held  that  the  defendant  Patterson  was  liable ;  that  as  to 
him  the  plaintiff  could  waive  the  tort  and  recover  for 
work,  labor  and  ser\'ices  performed  on  an  "implied  as- 
sumpsit;" that  is,  that  the  law  imposed  the  duty  upon 
the  defendant  Patterson  to  pay  the  plaintiff  the  value  of 
the  services  which  he  had  received  from  plaintiff  and 
had  not  paid  for.    As  to  the  defendant  Miller,  however, 
the  court  held  the  action  would  not  lie,  since  he  had  re- 
ceived nothing,  and  there  was  therefore  no  unjust  en- 
richment. In  a  similar  case  which  arose  in  Michigan  (11), 
however,  the  opposite  result  was  reached  by  the  court, 
the  same  mistake  being  made  again  as  to  the  character 
of  the  action  that  was  made  in  the  case  of  Watson  v. 
Stever,  cited  in  §14  above.    In  fact  the  court  relied  on 
that  case  as  its  authority.     The  authorities  on  this  par- 
ticular point  are  not  numerous,  and  apparently  are  about 
evenly  divided.    The  sound  view,  however,  seems  to  be 
that  represented  by  the  Indiana  decision.    It  would  seem 
to  be  immaterial  that  the  defendant  Patterson,  for  ex- 
ample, in  the  Indiana  case,  had  already  paid  the  state 
for  the  services  of  the  supposed  convict,  inasmuch  as 
the  state  was  not  entitled  to  the  services  of  the  plaintiff. 
§  22.  Recovery  for  services  of  apprentice  enticed  away. 


(11)     Thompson  v.  Bronk,  126  Mich.  455. 


186  QUASI-CONTRACTS 

In  the  case  of  Lightley  v.  Clouston  (12)  it  appeared 
that  the  defendant  had  induced  the  apprentice  of  the 
plaintiff  to  leave  the  plaintiff  and  perform  work  and 
labor  for  the  defendant.  It  was  clear  that  a  tort  action 
on  the  case  for  damages  could  have  been  brought  by  the 
plaintiff  against  the  defendant  for  his  wrongful  act  in 
inducing  the  apprentice  to  leave  the  plaintiff.  The  plain- 
tiff however  brought  an  at-tion  of  assumpsit  to  re<^over 
the  value  of  the  work  and  labor  performed  by  the  ap- 
prentice for  the'defendant,  on  the  theory  that  the  plain- 
tiff was  entitled  to  the  services  of  the  apprentice  during 
the  period  in  question.  Lord  Mansfield,  following  his  gen- 
eral principles,  held  that  the  plaintiff  might  waive  his 
action  to  recover  damages  for  the  tort  and  biing  as- 
sumpsit to  recover  the  value  of  the  work  and  labor  of 
the  apprentice. 

§  23.  Recovery  for  benefits  conferred  under  invaiid 
marriage.  In  the  case  of  Asher  v.  Wallis  (13)  the  defend- 
ant being  a  married  man,  represented  that  he  was  unmar- 
ried, and  went  through  the  marriage  ceremony  with  a  rich 
woman,  the  plaintiff  in  the  case.  She,  supposing  that  he 
was  her  husband,  allowed  him  to  exercise  the  usual  prop- 
erty rights  that  the  husband  was  entitled  to  under  the 
English  law,  and  he  accordingly  leased  her  lands  and 
collected  the  rents  of  the  same  for  a  number  of  years. 
She  then  discovered  the  fraud  which  had  been  practiced 
upon  her  and  brought  an  action  of  assumpsit  for  money 
had  and  received  to  her  use,  claiming  to  recover  in  the 


(12)  1  Taunt.  112. 

(13)  11  Mod.  146. 


QUASI-CONTRACTS  187 

action  the  amount  of  the  rent  which  he  had  thus  received. 
The  court  held  that  the  action  was  well  brought  and  that 
the  quasi-contractual  obligation  existed  under  the  cir- 
cumstances of  the  case.  In  another  case  (14)  in  which 
the  plaintiff  had  lived  with  the  defendant  under  the  hon- 
est belief  that  she  was  his  wife,  when  in  tnith  he  had  a 
former  wife  living,  the  action  was  brought  to  recover  for 
the  value  of  her  services  as  housekeeper  during  the  per- 
iod of  cohabitation.  The  Missouri  court,  in  an  elaborate 
opinion,  held  that  the  plaintiff  was  entitled  to  recover. 
However,  other  courts  on  a  similar  state  of  facts  have 
denied  a  recovery  (15).  It  would  seem  that  the  Mis- 
souri court  had  the  better  of  the  argument,  it  being  dif- 
ficult to  distinguish  between  the  case  of  the  collection  of 
rents  and  profits  of  real  estate  and  the  performance  of 
services. 

^  24.  Right  to  recover  benefits  conferred  under  sale 
rescinded  for  fraud.  In  the  case  of  Koth  v.  Palmer  (16) 
the  defendant,  by  false  or  fraudulent  representations, 
induced  the  plaintiff  to  sell  certain  goods  to  him  under  a 
contract  to  give  a  certain  period  of  credit  to  the  defend- 
ant. The  plaintiff  having  discovered  the  fraud,  without 
waiting  for  the  expiration  of  the  credit,  brought  an  ac- 
tion for  goods  sold  and  delivered.  The  defendant 
claimed  that  the  plaintiff  was  not  entitled  to  bring  an 
action  of  assumpsit  until  the  time  for  payment  had  ar- 
rived.    To  decide  the  case  it  is  necessary  for  us  to  ex- 


(14)  Higgins  v.  Breene,  9  Mo.  497. 

(15)  Swires  v.  Parsons,  5  Watts  &  Serg.  (Pa.)  357. 

(16)  27  Barb.  (N.  Y.)  652. 


188  QUASI-CONTRACTS 

amine,  somewhat  carefully,  the  rights  of  the  defrauded 
seller  in  a  case  of  this  kind.  Apparently  they  are  as 
follows:  On  discovering  the  fraud  he  may,  if  he  so 
wishes,  elect  to  affirm  the  contract  and  in  that  case  he 
would  be  bound  by  all  its  terms,  and  so  of  course  could 
not  bring  an  action  for  breach  of  that  contract  until  the 
credit  had  expired,  and  the  defendant  had  failed  to  per- 
form according  to  the  terms  of  the  agreement.  But 
the  law  pennita  the  defrauded  seller  to  elect,  if  he  wishes, 
to  treat  the  agreement  as  a  nullity,  on  learning  of  the 
fraud.  If  he  adopts  this  course,  the  result  is  that  he 
may  at  once  bring  an  action  in  trover  against  the  fraudu- 
lent buyer  for  a  conversion  of  the  proj^erty.  The  ques- 
tion with  which  we  are  concerned,  then,  is  (if  the  case 
arises  in  a  state  which  pennits,  in  the  case  of  ordinary 
conversion  of  chattels,  the  plaintiff  to  waive  the  tort  and 
sue  in  assumpsit  for  goods  sold  and  delivered)  whether 
the  defrauded  seller  who  has  chosen  to  treat  the  contract 
as  a  nullity,  may  waive  the  tort  action  and  bring  the 
assumpsit  action  for  goods  sold  and  delivered.  The  New 
York  court,  in  the  case  cited,  held  thiit  he  was  entitled  to 
do  so,  and  the  conclusion  reached  seems  correct.  There 
is,  however,  an  English  case  which  takes  the  other  view 
(17).  The  latter  decision  seems  to  be  based  upon  an 
erroneous  assumption  that  the  bringing  of  an  action  of 
assumpsit  for  goods  sold  and  delivered  necessarily  meant 
that  the  defrauded  seller  had  chosen  to  affirm  the  con- 
tract instead  of  disaffirming  it,  but  the  New  York  court, 
in  the  case  cited,  shows  that  this  is  not  true.    In  a  juris- 


(17)     Ferguson  v.  Carrington,  9  B.  &  G,  59. 


QUASI-CONTRACTS  189 

diction  which  agrees  with  the  Massachusetts  view,  laid 
down  in  the  case  of  Jones  v.  Hoar  in  §  14  above  (that 
the  plaintiff  cannot  waive  the  tort  and  sue  in  assumpsit 
for  goods  sold  and  delivered)  the  decision  in  the  English 
case  is,  of  course,  correct. 

§  25.  Election  of  remedies.  From  our  discussion  thus 
far  it  appears  that  in  many  cases  a  plaintiff  has  a  choice 
between  different  remedies.  The  interesting  question 
arises,  then,  when  has  he  conclusively  elected  one  in  pre- 
ference to  the  other?  For  example,  suppose  that  the 
plaintiff  has  his  choice  to  sue  in  trover  for  the  conversion 
of  the  given  article,  or  to  waive  the  tort  and  sue  in  as- 
sumpsit for  the  value  of  the  same.  Suppose  further  that 
he  has  begun  the  action  in  assumpsit  and  for  some  reason 
has  discontinued  the  same  without  prosecuting  it  to  judg- 
ment. May  he  thereafter  prosecute  the  tort  action  for 
the  wrong  in  question?  Upon  this  point  the  authorities 
are  divided,  the  conflict  having  arisen  from  the  failure  of 
certain  courts  to  appreciate  clearly  the  basis  of  the  as- 
sumpsit action  in  cases  of  this  kind.  For  example,  in 
the  case  of  Terry  v.  Munger  (18)  the  court  held  that  by 
bringing  an  action  of  assumpsit  the  plaintiff  had  elected 
to  treat  the  transaction  as  a  sale,  that  therefore  the  title 
to  the  property  would  pass  to  the  wrongdoer,  and  that 
the  case  must  be  treated  for  all  purposes  as  if  the  title 
had  passed  at  the  time  of  the  wrongful  act.  According 
to  this  view,  therefore,  an  attempt  to  bring  a  trover  ac- 
tion for  the  conversion  later  would  be  for  the  plaintiff  to 
adopt  a  position  inconsistent  with  the  one  he  had  oceu- 


(18)     121  N.  Y.  161. 


190  QUASI-CONTRACTS 

pied  in  the  previous  assumpsit  case.  This  view,  how- 
ever, is  contrary  to  the  decision  in  the  case  of  Huffman 
V.  Hughlett  (19)  in  which  the  opposite  conclusion  is 
reached.  The  view  of  the  New  York  court  seems  on  prin- 
ciple to  be  unsound.  If  we  recall  that  the  declaration 
in  general  assumpsit  is  not  to  be  taken  at  its  face  value, 
and  that  the  supposed  sale  and  supposed  promise  are  fic- 
titious and  not  real,  it  seems  clear  that  the  bringing 
of  the  action  of  assumpsit  for  goods  sold  and  delivered, 
where  the  plaintiff  is  waiving  the  tort,  is  not  the  assertion 
of  an  actual  sale,  but  is  really  an  assertion  of  a  wrongful 
act  of  the  defendant  and  the  unjust  enrichment  growing 
out  of  it.  There  is  therefore  nothing  inconsistent  in  the 
plaintiff  later  bringing  the  tort  action  and  insisting  upon 
the  conversion.  It  is,  however,  clear  that  if  the  plaintiff 
brings  one  of  these  actions  against  the  defendant  and 
recovers  a  judgment  for  the  same,  he  is  precluded  there- 
after from  bringing  any  other  action  against  the  defend- 
ant on  account  of  the  same  transaction.  This  is  not  be- 
cause he  is  held  to  have  conclusively  elected  between  the 
actions,  but  because  of  the  principle  of  the  common  law 
which  does  not  permit  a  plaintiff  to  litigate  twice  wh'at 
is  really  the  same  matter.  The  principle  involved  is 
frequently  stated  in  the  form  that  no  one  shall  be 
twice  vexed  for  the  same  wrong,  and  it  is  clear,  of 
course,  that  there  really  is  one  wrong,  and  only  one,  in 
these  cases. 


(19)     11  Lea  (Tenn.)  549. 


CHAPTER  III. 

RECOVERY  FOR  BENEFITS  CONFERRED  WITHOUT  A 
CONTRACT. 

Section  1.     Recovery  of  Money  Paid  Undek  Compulsion. 

§  26.  No  recovery  if  parties  are  **in  pari  delicto."  It 
is  the  general  principle  of  the  law  of  quasi-contracts  and 
a  limitation  upon  the  rule  that  the  plaintiff  may  recover 
if  the  defendant  has  unjustly  enriched  himself  at  the 
plaintiff's  expense,  that  if  the  plaintiff  and  defendant  are 
equally  guilty  of  engaging  in  an  illegal  transaction,  the 
plaintiff  will  not  be  aided  by  the  court  in  recovering  of 
the  defendant  for  the  benefit  conferred  or  obtained  by 
the  defendant.  The  ground  of  the  refusal  is  not  the 
merit  of  the  defendant,  nor  that  the  defendant  has  not 
unjustly  enriched  himself  at  the  expense  of  the  plaintiff, 
but  it  is  the  demerit  of  the  plaintiff.  The  court  is  not 
willing  to  aid  a  plaintiff  of  this  character.  In  certain 
cases,  however,  in  which  the  plaintiff  has  been,  jointly 
with  the  defendant,  engaged  in  an  illegal  transaction, 
the  courts  are  willing  to  help  the  plaintiff  in  spite  of  the 
fact,  because  they  believe  the  plaintiff  is  not  equally 
guilty  with  the  defendant.  The  principle  that  the  plain- 
tiff cannot  recover  where  he  has  been  equally  guilty  with 
the  defendant,  of  engaging  in  an  illegal  transaction,  is 
well  illustrated  in  the  decision  of  Thompson  v.  Williams 

m 


192  QUASI-CONTRACTS 

(1)  where  the  defendant  purchased  from  the  plaintilT 
on  Sunday  two  cows,  promising  to  pay  for  them  at  a  later 
date.  The  defendant  refused  to  pay  for  the  cows, 
whereupon  the  plaintiff  took  them  from  the  defendant. 
The  defendant  then  sued  the  plaintiff  in  on  action  of 
trespass,  and  collected  a  judgment  for  the  value  of  the 
cows,  the  jury  finding  that  the  value  of  the  cows  was  the 
contract  price  agreed  between  the  plaintiff  and  the  de- 
fendant. Thereupon  the  plaintiff  sued  the  defendant  in 
assumpsit  for  the  price  of  the  cows.  It  appeared  by  the 
law  of  the  state  that  it  was  illegal  to  transact  business  on 
S^mday.  The  contract  therefore  could  not  be  enforced 
by  the  plaintiff;  but  the  plaintiff  argued  that  he  was  en- 
titled to  recover,  not  on  the  contract  but  on  the  quasi-con- 
tract on  account  of  the  unjust  enrichment  of  the  defend- 
ant at  his  expense.  The  court  however  held  that  the 
plaintiff  could  not  recover,  as  he  had  been  equally  guilty 
with  the  defendant  in  engaging  in  an  illegal  transaction. 

§  27.  Transaction  illegal  on  account  of  statute  for  pro- 
tection of  plaintiff.  In  the  case  of  Smith  v.  Bromley  (2) 
the  plaintiff  sought  to  recover  interest  which  he  had  paid 
to  the  defendant  in  excess  of  tuj  legal  rate,  as  estab- 
lished by  the  law  against  usury.  The  question  for  decision 
was  whether  the  rule  applied  that  the  plaintiff  cannot  re- 
cover when  he  has  been  engaged  in  a  common  illegal 
transaction  with  the  defendant.  The  statute  made 
usurious  contracts  illegal.  The  court  held,  however, 
where  a  statute  of  this  kind  making  certain  contracts  il- 


(1)  58  N,  H.  248. 

(2)  2  Doug.  696. 


QUASI-CONTRACTS  193 

legal  was  intended  for  the  protection  of  one  class  against 
another,  as  in  this  case  for  the  protection  of  the  debtor 
against  the  creditor,  the  principle  had  no  application ;  for 
to  apply  it  would  be  to  nullify  the  object  of  the  statute 
and  to  permit  the  usurious  creditor  to  keep  the  excessive 
interest  which  he  was  forbidden  by  the  law  to  take.  It 
was  accordingly  held  that  the  plaintiff  was  entitled  to  re- 
cover. 

§  28.  Money  paid  under  duress  of  goods.  In  the  case 
of  Astley  v.  Reynolds  (3)  the  plaintiff  pawned  certain 
plate  with  the  defendant.  When  the  plaintiff  sought  to 
redeem  the  same,  the  defendant  demanded  a  much  larger 
sum  than  he  was  entitled  to,. and  the  plaintiff  finally,  in 
order  to  get  the  plate,  paid  the  amount  demanded,  re- 
covered the  plate,  and  then  brought  an  action  for  money 
had  and  received  to  recover  the  excess.  The  defendant 
argued  that  the  plaintiff  was  not  entitled  to  recover,  as 
he  had  voluntarily  paid  the  sum.  The  court  held  how- 
ever that  this  was  not  a  voluntary  payment,  but  one  made 
under  such  compulsion  that  an  action  based  on  quasi-con- 
tract would  lie.  In  other  words  the  court  in  this  case 
established  the  principle  that  when  the  defendant  has 
property  belonging  to  the  plaintiff  in  his  possession 
and  refuses  to  surrender  the  same  until  the  plaintiff  pays 
a  sum  not  legally  due,  the  plaintiff  may  in  order  to  obtain 
the  property  without  delay,  pay  the  sum  thus  illegally 
demanded  and  then  recover  the  amount  in  a  quasi-con- 
tractual action. 

A  case  involving  a  similar  principle  is  that  of  Irving 


(3)     2  Strange  915. 


194  QUASI-OONTRACTS 

V.  "Wilson  (4)  in  which  a  public  official  illegally  seized 
certain  goods  of  the  plaintiff.  To  induce  hiin  to  surren- 
der the  goods,  the  plaintiff  paid  the  sum  to  the  official 
and  it  was  held  that  he  could  recover  the  amount  tlius 
paid  in  an  action  for  money  had  and  received.  In  another 
case  (5)  the  plaintiff*  was  conducting  his  raft  through  the 
Penobscot  river,  and  when  he  came  near  the  boom  of  the 
defendant,  which  was  erected  under  a  charter  from  the 
state,  he  was  unable  to  pass  through  the  passageway  left 
for  that  purpose,  and  by  force  of  the  wind  and  current 
his  raft  was  driven  out  of  the  passage  and  stopped  by  the 
defendant's  boom.  The  plaintiff  and  his  assistants  im- 
mediately endeavored  to  free  the  raft  from  the  boom  and 
conduct  it  through  the  passage,  which  he  succeeded  in 
doing  in  two  or  three  hours.  Later  the  defendant  de- 
manded of  the  plaintiff  a  certain  sum,  being  the  amount 
of  the  regular  boomage  for  the  raft,  which  the  plaintiff 
refused  to  pay.  The  defendant  thereupon  stopped  the 
raft  until  the  plaintiff  paid  the  sum  demanded.  The 
action  was  brought  by  the  plaintiff  to  recover  the  sum 
thus  exacted  by  the  defendant,  and  the  court  held  that  the 
plaintiff  was  entitled  to  recover. 

In  the  case  of  Tutt  v.  Ide  (6)  the  defendants,  as  com- 
mon carriers,  agreed  to  carry  goods  from  Boston  to  St. 
Louis  for  a  certain  sum.  At  St.  Louis  the  carrier  refused 
to  deliver  the  goods  to  the  plaintiff  until  he  paid  a  much 
larger  sum,  which  the  plaintiff  did  in  order  to  get  the 


(4)     4  T.  R.  485. 

^5)     Chase  v.  Diwinal,  7  Greenl.  (Me.)  134« 

(6)     3  Blatcb.  (U.  S.)  249. 


QUASI-CONTRACTS  195 

goods.  This  also  was  held  to  be,  as  to  the  excess,  not  a 
voluntary  payment,  and  so  the  plaintiff  was  allowed  to 
recover  for  the  same. 

§29.    Money  paid  under  compulsion  of  legal  process. 
In  another  case  the  defendant  held  a  promissory  note  of 
the  plaintiff,  an  ice  dealer,  which  however  the  defendant 
knew  was  no  longer  enforceable  because  of  a  discharge 
of  the  plaintiff  in  bankruptcy.     The  defendant  however 
began  a  proceeding  to  enforce  the  note,  which  on  its  face 
appeared  to  be  enforceable,  and  at  two  o'clock  on  Mon- 
day morning  he  attached  five  carts  belonging  to  the  plain- 
tiff, together  with  horses  hitched  thereto,  which  had  just 
been  loaded  with  ice  and  were  ready  to  start  to  Boston 
to  deliver  the  ice  to  customers.     The  defendant's  attor- 
ney told  the  plaintiff  that  he  could  not  start  until  the  sum 
sought  to  be  recovered  on  the  note  was  paid.   The  plain- 
tiff thereupon  paid  the  sum  demanded  in  order  to  be  able 
to  proceed  to  Boston  and  deliver  his  ice.    In  an  action  for 
money  had  and  received  he  was  allowed  to  recover  the 
amount  paid  (7). 

In  another  case  (8)  the  defendant  had  filed  a  lien  on 
the  plaintiff's  real  estate,  which  on  its  face  was  valid, 
though  in  truth  invalid.  The  plaintiff,  being  in  debt  and 
desiring  to  raise  money  by  mortgage  on  his  real  estate, 
found  it  impossible  to  do  so  until  the  apparent  lien  was 
removed.  The  defendant,  although  he  knew  the  lien  was 
not  valid,  refused  to  disdiarge  it  on  the  record  until  the 
plaintiff  should  pay  the  alleged  debt.  Plaintiff  thereupon 


(7)  Chandler  v.  Sanger,  114  Maas.  364. 

(8)  Joannin  v.  Ogllvit,  49  MiiMi.  564. 


196  QUASI-CONTRACTS 

paid  the  amount  demanded  in  order  to  get  the  lien  dis- 
charged from  the  record  and  it  was  held  that  the  com- 
pulsion was  sufficient  to  entitle  the  plaintiff  to  recover 
the  amount  so  paid. 

In  the  case  of  Richardson  v.  Duncan  (9)  the  defend- 
ant made  a  complaint  to  a  justice  of  the  peace  that  the 
plaintiff  and  his  son  had  toni  down  the  barns  and  house 
of  the  defendant,  on  the  strength  of  which  information 
a  warrant  was  issued.  The  plaintiff  and  his  son  were 
taken  before  the  magistrate  for  examination.  The  evi- 
dence showed  that  the  plaintiff  and  his  son  had  peaceably 
and  quietly  taken  down  an  old  house  and  barn  that  stood 
on  defendant's  land  and  had  burned  some  refuse  boards 
and  shingles.  The  justice  held  the  man  and  son  for  trial 
at  the  next  term  of  the  superior  court,  requiring  a  bond 
in  the  sum  of  $500  from  each,  with  sureties.  The  de- 
fendant and  others  represented  to  the  plaintiff  and  others 
that  they  would  have  to  go  to  state's  prison,  and  the  re- 
sult was  that  the  plaintiff  and  his  son  could  not  get  sure- 
ties on  the  bond.  The  defendant  then  told  the  plaintiff 
and  his  son  that  they  had  better  settle  the  matter,  and  he 
offered  to  drop  the  matter  for  $125.  Plaintiff  assented 
and  paid  the  sum  sued  for  in  pursuance  of  the  agreement. 
It  was  held  that  he  could  recover.  A  case  of  this  kind 
should  be  carefully  distinguished  from  the  payment  made 
to  stop  a  legitimate  prosecution  made  in  good  faith,  in 
which  case  the  plaintiff  would  be  equally  guilty  with  the 
defendant  of  engaging  in  an  illegal  transaction  and  could 

(9)     3  N.  H.  508. 


QUASI-CONTRACTS  .  197 

therefore    recover  nothing,  as  was  held  in  the  ease  of 
Daimouth  v.  Bennett  (10). 

§  30.    Money  paid  under  a  judgment.    In  Mariott  v. 
Hampton  (11)  the   plaintiff   sought   to   recover   money 
which  he  had  paid  the  defendant  under  the  following  cir- 
cumstances:    The  defendant,  as  plaintiff  in  the  former 
suit,  sued  for  goods  sold.     The  plaintiff,  as  defendant  in 
the  former  suit,  had  actually  paid  the  sum  demanded  but 
could  not  find  the  receipt,  and  so  was  not  able  to  establish 
the  fact  of  payment,  in  consequence  of  which  judgment 
was  rendered  against  him,  which  he  paid.    Subsequently 
he  brought  the  present  action  to  recover  the  amount  so 
paid.    It  was  held  that  there  could  be  no  recovery.    In 
a  Pennsylvania  case  (12)  the  court  expressed  the  reason 
for  this  as  follows:    '* Money  collected  or  paid  upon  law- 
ful process  cannot  be  recovered  back,  though  not  justly 
or  lawfully  due  by  the  defendant  in  the  execution  to  the 
plaintiff. . . , The  reason  is  a  veiy  obvious  one.    An  execu- 
tion is  the  end  of  the  law.    To  permit  money  so  collected 
or  paid  to  be  re-collected  in  a  new  suit  would  lead  to  in- 
finite and  endless  litigation.    If  such  suit  could  be  main- 
tained then  another  might  be  brought  to  recover  the 
money  paid  on  the  judgment  and  execution  in  it,  and  so 
on  ad  infinitum." 

Suppose  a  judgment  be  entered  in  favor  of  A  by  the 
trial  court  in  a  suit  between  A,  the  plaintiff,  and  B,  the 
defendant.    B  intends  to  take  an  appeal.    May  he  never- 


(10)  15  Barb.  541. 

(11)  7  T.  R.  269. 

(12)  Federal  Ins.  Co.  v.  Robinson,  82  Pa.  St.  357. 

Vol  I— 18 


198  QUASI-CONTRACTS 

theless,  in  the  mean  time,  pay  the  amount  of  the  judg- 
ment, and  then  if  tlio  judgment  bo  reversed  on  appeal, 
bring  an  action  to  recover  the  amount  so  paid  ?  The  an- 
swer to  this  seems  to  be  in  the  affirmative.  The  reason 
is  that  the  judgment  when  entered  creates  a  legal  duty 
to  pay  the  money,  and  a  payment  of  it  is  regarded  as 
made  under  compulsion  of  law,  and  this  is  true  even 
though  the  one  against  whom  the  judgment  was  rendered 
did  not  wait  for  execution  to  be  issued  and  a  levy  made 
on  his  property  (1.".). 

^  31.  Money  paid  to  prevent  illegal  seizure  for  taxes. 
In  the  case  of  Preston  v.  lioston  (14)  the  })l;untiff  sued 
the  city  to  recover  a  sum  of  money  paid  to  the  city  for  a 
tax  assessed  against  liim  when  he  was  not  lial)le  for 
the  same  because  he  was  a  non-resident  of  the  city.  He 
paid  the  same  under  protest,  in  order  to  prevent  a  seiz- 
ure of  his  person  and  goods.  Under  the  Massachusetts 
law  it  appeared  that  the  tax  officials  had  a  right,  in  the 
case  of  a  tax  legally  due,  to  seize  summarily  the  person 
or  property  of  the  delinquent  tax  payer  in  order  to  col- 
lect the  tax,  and  in  this  particular  case  the  official  had 
insisted  that  unless  the  plaintiff  paid,  he  would  proceed 
to  act  in  pursuance  of  this  law.  The  plaintiff  was  held 
entitled  to  recover  the  sum  so  paid.  There  is  some 
discussion  in  these  cases  as  to  the  necessity  of  protest- 
ing against  the  collection  at  the  time  payment  is  made  in 
order  to  be  able  to  recover  in  a  suit  against  the  official,  but 
it  seems  clear  that  where  the  officer  seizes  the  goods  under 


(13)  Hosmer  v.  Barret,  2  Root  (Conn.)   156. 

(14)  12  Pick.  (Maes.)  7. 


QUASI-CONTRACTS  199 

color  of  process,  as  iu  the  case  just  cited,  no  formal  pro- 
test would  be  necessary.  The  safe  way,  however,  in 
such  a  case,  is  to  protest  formally  against  the  payment, 
stating  to  the  officer  that  you  do  so  only  for  the  purpose 
of  preventing  the  seizure  of  your  goods,  or  of  recovering 
the  possession  if  they  have  already  been  seized,  and  not 
for  the  purpose  of  paying  the  tixx,  and  farther  that  you 
expect  later  to  sue  and  recover  the  sum  so  paid.  In  that 
case  there  can  be  no  doubt  of  the  recovers-  (15). 

In  all  cases  of  this  kind  it  must  appear  that  the  plain- 
tiff made  the  payment  under  the  threat  and  the  com- 
pulsion of  the  process.  For  example,  a  recovery  was  de- 
nied in  a  case  in  which  the  jilaintiff,  having  been  arrested 
by  the  collector  for  not  paying  the  tax,  was  released  on 
agreeing  to  pay  the  same,  and  then  at  the  end  of  the 
week  did  pay  the  amount  alleged  to  he  due.  It  was  held 
that  the  compulsion  of  the  imprisonment  had  ceased  to 
act  and  that  therefore  the  payment  fell  under  the  class 
of  voluntaiy  payments  (16). 

^  32.  Money  paid  in  discharge  of  a  duty.  An  interest- 
ing case  is  that  of  Wells  v.  Porter  (17).  The  plaintiff 
had  hogs  at  a  distilleiy  to  be  fattened.  The  defendants 
were  tenants  of  the  distillery  and  had  failed  to  pay  the 
rent  when  due,  whereupon  the  landlord,  in  the  exercise 
of  his  common-law  right  of  distraint,  seized  the  hogs 
belonging  to  the  plaintiff  as  security  for  the  payment 
of  the  rent  due  from  the  defendant.     At  common  law 


(15)  Elliott  V.  Swartwout,  10  Peters  (U.  S.)  137. 

(16)  Fellows  V.  School  District,  39  Me.  559. 

(17)  7  Wend.  (N.  Y.)  119. 


200  QUASI-CONTRACTS 

the  landlord  had  the  right  to  make  a  seizure  of  this 
kind,  that  is,  the  landlord,  as  security  for  the  rent  due, 
was  entitled  to  seize  and  hold  chattels  on  the  land,  even 
though  they  were  not  the  property  of  the  tenant  but  of 
someone  else.  In  order  to  secure  the  return  of  his  prop- 
erty, the  plaintiff  paid  the  rent  to  the  landlord,  and  in 
this  action  sues  to  recover  the  sum  so  paid  on  the  ground 
that  it  was  money  paid  by  the  plaintiff  to  the  use  of  the 
defendant.  Following  a  celebrated  English  case  decided 
much  earlier  (18)  the  court  allowed  a  recovery. 

In  Brown  v.  Hodgson  (19)  the  plaintiff  was  a  common 
carrier  and  by  mistake  delivered  property  to  the  defend- 
ant instead  of  to  the  consignee.  The  defendant  there- 
upon appropriated  the  property  to  his  own  use  by  selling 
the  same  and  receiving  the  money  for  it.  The  plaintiff, 
the  carrier,  admitting  its  mistake,  paid  the  consignee  the 
value  of  the  property  and  brought  this  action  against 
the  defendant  for  money  paid  to  the  use  of  the  defendant. 
It  is  needless  to  say  that  the  plaintiff  recovered,  the 
court  holding  that  the  payment  by  the  carrier  to  the  con- 
signee was  not  a  voluntary  payment,  but  one  made  in  pur- 
suance of  a  legal  duty.  In  another  case  (20)  the  plain- 
tiff w^as  also  a  common  carrier,  and  the  defendant  re- 
fused to  receive  a  horse  which  the  plaintiff  had  carried 
for  him  unless  they  would  let  him  have  it  without  pay- 
ing what  was  due  them,  which  they  of  course  refused  to 
do.     The  plaintiff  thereupon  sent  the  horse  to  a  livery 


(18)  Exall  V.  Partridge,  8  T.  R.  308. 

(19)  4  Taunt.  189. 

(20)  Great  Nortliern  Railroad  v.  Swaffield,  L.  R.  9  Ex.  132. 


QUASI-CONTRACTS  201 

stable  and  paid  the  livery  stable  keeper  the  charges  for 
boarding  the  same.  The  plaintiff  was  allowed  to  re- 
cover the  sum  so  paid,  from  the  defendant,  although  it 
was  clear  that  the  defendant  could  not  have  been  sued 
for  the  sum  in  question  by  the  livery  stable  keeper. 

§  33.  Contribution  between  joint  wrong-doers.  It  is 
often  stated  that  as  between  joint  wrong-doers,  that  is, 
as  between  people  who  have  jointly  committed  a  tort 
against  a  third  person,  no  right  of  contribution  exists. 
For  example,  if  one  of  them  is  sued  by  the  person  injured 
and  has  to  pay  the  whole  damage,  according  to  the  rule 
as  frequently  stated,  th^  one  who  has  thus  paid  for  the 
damage  caused  by  the  two  has  no  action  to  recover  a 
proportionate  share  of  this  amount  from  the  other  equally 
guilty  party.  This  is  of  course  supposed  to  be  an  ap- 
plication of  the  rule  that  where  two  persons  are  equally 
guilty,  one  cannot  recover  from  the  other,  even  though 
one  has  been  unjustly  enriched  at  the  expense  of  the 
other.  Here  the  enrichment,  if  any,  takes  place  in  a 
negative  way,  as  it  did  in  the  cases  we  have  just  been 
discussing.  The  plaintiff  has  paid  an  obligation  of  the 
defendant's  so  that  the  defendant  is  no  longer  under  an 
obligation.  In  other  words,  relieving  a  man  from  a 
liability  is  as  much  an  enrichment  as  adding  directly  to 
his  assets. 

§  34.  Same:  Where  recovery  is  allowed.  The  rule  as 
to  contribution,  however,  as  generally  stated,  is  subject 
to  certain  qualifications,  and  must  be  explained,  if  it  is 
not  to  mislead.  For  example,  it  is  often  true  that  two 
persons  are  both  liable  for  the  same  wrongful  act  and  yet 


202  QUASI-CONTRACTS 

are  not  equally  guilty.     To  illustrate :    According  to  the 
law  of  torts,  a  master  is  liable  in  damages  for  a  tort  in- 
flicted by  his  servant  upon  a  third  party,  if  the  act  was 
done  while  the  servant  was  acting  in  the  scope  of  his 
employment,  that  is,  while  he  was  doing  the  master's 
work.     The  servant  is  himself,  of  course,  also  liable  to 
the  injured  party  for  the  tort.     Suppose  now  the  master 
is  sued  for  the  tort  of  his  servant,  committed  within  tne 
scope  of  his  employment,  but,  let  us  say,  in  the  absence 
of  the  master  and  in  violation  of  the  master's  orders. 
The  master  is  liable  and  if  sued  will  have  to  pay  the  bill. 
The  master  is  clearly  not  a  joint  wrong-doer  in  the  sense 
of  being  equally  guilty.     The  servant  did  the  act;  the 
master  did  not,  but  as  a  matter  of  law  is  simply  respon- 
sible to  third  parties  for  the  acts  of  his  servant  because 
the  servant  was  doing  his  work.     Indeed  the  act  of  the 
servant  in  cases  of  this  kind  is  a  clear  breach  of  duty 
to  the  master.     It  would  seem,  therefore,  that  in  a  case 
of  this  kind  the  master  ought  to  be  allowed  to  recover 
from  the  servant  the  amount  he  has  thus  been  forced  to 
pay  because  of  the  servant's  wrongful  act,  it  being  re- 
membered that  the  payment  by  the  master  discharges  the 
legal  liability  of  the  servant  to  the  third  person.    As  be- 
tween the  two  the  servant  ought  wholly  to  bear  the  bur- 
den.    In  Bailey  v.  Bussing  (21)  the  decision  was  based 
upon  this  principle.     In  fact,  the  rule  that  there  shall  be 
no  contribution  between  joint  wrong-doers  should  be  con- 
fined to  cases,  as  Story  says,  "where  the  tort  is  a  known 
meditated  wrong  and  not  where  the  party  is  acting  under 

(21)     28  Conn.  455. 


QUASI-CONTRACTS  203 

the  supposition  of  the  entire  innocence  and  propriety  of 
the  act,  and  the  tort  is  merely  one  by  construc4:ion  or 
inference  of  law.  In  the  latter  case  .  .  .  there  may  be 
and  properly  is  a  contribution  allowed  by  law  for  such 
payments  and  expenditures  between  constructive  wrong- 
doers." Citing  this  view  of  Story's,  the  court  in  a 
Pennsylvania  case  (22)  decided  that  where  two  counties 
were  jointly  in  charge  of  a  bridge  and  negligently  allowed 
it  to  get  out  of  repair  so  that  a  third  person  was  in- 
jured, and  where  the  injured  person  had  sued  one  county 
and  recovered  full  compensation  from  that  county,  the 
county  which  had  paid  could  recover  from  the  other 
county  a  proportionate  share  of  the  amount  paid.  There 
is  here  some  conflict  in  the  authorities,  some  cases  hold- 
ing to  the  view  that  even  in  such  a  case  there  can  be  no 
contribution. 

§  35.  Contribution  between  co- contractors.  In  Golsen 
V.  Brand  (23)  the  plaintiff  and  the  defendant,  each  act- 
ing separately  and  for  himself,  wrote  their  names  upon 
the  back  of  a  note,  the  legal  effect  of  which  in  Illinois 
under  the  law  at  that  time  was  to  make  each  one  a  guar- 
antor of  the  due  payment  of  the  note.  The  note  was  not 
paid  by  the  maker  and  the  holder  collected  the  full 
amount  from  Brand,  the  plaintiff,  who  thereupon  sued 
Golsen  for  contribution.  Here  clearly  was  a  case  where 
the  liability,  if  any,  was  quasi-contractual,  for  Golsen 
and  Brand  had  no  dealings  with  each  other  in  any  way. 
A  recovery  of  one-half  the  amount  paid  was  allowed  on 


(22)  Armstrong  County  v.  Clarion  County,  66  Pft.  St.  218, 

(23)  75  111.  148. 


204  QUASI-CONTRACTS 

the  ground  that  Brand  had  discharged  not  only  his  own 
but  Golsen's  obligation.  They  were  under  a  common 
burden  which  equitably  they  ought  to  share  equally,  and 
one  had  borne  the  whole.  In  fact  this  case  is  merely  an 
illustration  of  the  principle  which  underlies  the  whole 
doctrine  of  contribution  between  co-sureties  and  co- 
guarantors  in  the  law  of  suretyship  and  guaranty.  See 
Suretyship  in  Volume  VII  of  this  work. 

Section  2.     Rje}covbry  for  Benefits  Conferred  Without 

Request. 

§  36.    Where  plaintiff  intends  to  benefit  defendant.  In 

the  class  of  cases  with  which  we  shall  next  deal,  it  is  as- 
sumed that  no  compulsion  of  law,  or  duress,  legal  or 
equitable,  exists.  The  first  rule  in  connection  with  the 
subject  of  the  present  chapter  is  that  one  who  voluntarily 
plays  the  part  of  intermeddler,  "an  officious  intermed- 
dler"  as  he  is  often  called,  gets  nothing  for  his  pains. 
Take  the  simplest  case:  If  A  owes  B  a  sum  of  money 
and  C  voluntarily  and  without  the  request  or  knowledge 
of  A,  pays  B  this  sum  for  A ;  while  the  effect  of  this  is  to 
discharge  the  obligation  from  A  to  B,  C  acquires  no 
right  of  reinbursement  from  A.  Another  simple  case  is 
where  one  intending  to  make  a  gift  transfers  property  to 
another.  He  cannot,  of  course,  subsequently  change  his 
mind  and  recover  the  value  of  the  property  in  quasi- 
contract.  This  latter  case  is  well  illustrated  by  Robin- 
son V.  Gumming  (24)  in  which  the  plaintiff  sought  to  re- 
cover under  the  following  circumstances:     The  plaintiff 


(24)     2  Atk.  409. 


QUASI-CONTRACTS  205 

was  paying  attention  to  a  young  lady,  hoping  to  marry 
her,  and  while  doing  so  made  her  presents  worth  about 
£120.  She  married  another  man  and  the  plaintiff  sued 
to  recover  the  value  of  the  presents,  but  it  was  held  that 
he  could  not. 

§  37.  Same:  Saving  property.  Suppose  the  plaintiff 
finds  the  defendant's  property  in  danger  of  being  des- 
troyed, and,  although  under  no  duty  to  do  so,  voluntarily 
takes  it  in  charge,  and  in  order  to  preserve  it  expends 
labor  and  materials  upon  it.  May  he  recover  from  the 
owner  the  value  of  his  labor  and  materials  expended  in 
the  preservation  of  the  defendant's  property?  It  seems 
that  the  owner  may  say  that  he  does  not  care  for  the  prop- 
erty and  may  abandon  it,  in  which  case  the  one  who  has 
preserved  it  may  recover  nothing.  But  suppose,  as  in 
Chase  v.  Corcoran  (25)  the  owner  demands  his  property 
and,  when  the  plaintiff  refuses  to  surrender  it  until  paid 
for  the  work  of  repairing,  brings  an  action  of  replevin  and 
recovers  the  property.  Surely  the  owner  must  in  such 
a  case  pay  the  reasonable  cost  of  preserving  his  property, 
for  had  it  not  been  for  the  plaintiff's  act  he  would  have 
had  no  property  to  recover  in  the  replevin  action.  This 
was  the  result  reached  in  the  case  cited.  It  is  held,  how- 
ever, that  the  one  who  has  preserved  the  property  is  not 
entitled  to  retain  the  property  until  he  is  paid ;  that  is,  he 
has  no  lien  upon  the  property  to  secure  the  payment  of 
the  amount  due,  but  is  left  to  bring  an  action  in  quasi-con- 
tract for  the  same.    In  another  case  (26)  the  plaintiff  re- 


(25)  106  Mass.  286. 

(26)  Reeder  v.  Anderson's  Admr.,  4  Dana  193. 


206  QUASI-CONTRACTS 

covered  a  reasonable  comjDensatiou  Tor  liis  labor  and  ex- 
penses incurred  in  ai)prehending  and  restoring  to  the  de- 
fendant a  runaway  slave. 

We  must,  liowever,  note  one  limitation  on  the  doctrine 
of  these  cases,  or  rather  an  explanation  of  it.  In  order 
that  the  plaintiff  recover  it  is  necessary  to  find  that  he 
did  the  act,  not  as  a  gift  or  an  act  of  mere  neighborly 
kindness,  but  expecting  to  be  paid  for  the  same.  The 
neighbor  who,  not  expecting  to  be  paid,  saves  my  prop- 
erty from  destruction,  cannot  afterward  recover  payment 
from  me.  This  seems  to  be  the  basis  of  decision  in  the 
case  of  Bartholomew  v.  Jackson  (27)  in  which  the  plain- 
tiff had  moved  some  stacks  of  wheat  belonging  to  the  de- 
fendant to  a  place  of  safety,  thus  preserving  them  from 
destruction  by  fire.  The  court  in  deciding  that  the  plain- 
tiff could  not  recover,  said:  ''If  a  man  humanely  bestows 
his  labor  and  even  risks  his  life  in  voluntarily  aiding  to 
preserve  his  neighbor's  house  from  destruction  by  fire, 
the  law  considers  the  services  rendered  as  gratuitous  and 
it  therefore  forms  no  ground  of  action." 

§  38.  Benefits  conferred  at  request  of  third  party.  It 
some  times  happens  that  a  benefit  is  conferred  by  one 
person  upon  another  without  the  request  of  that  person 
but  at  the  request  and  upon  the  credit  of  a  third  person. 
For  example,  in  a  case  which  arose  in  Massachusetts  the 
plaintiff,  at  the  request  of  the  son  of  the  defendant  and 
relying  on  the  son  to  pay  him,  had  shod  a  horse  belonging 
to  the  defendant.  The  son  having  failed  to  pay,  the 
plaintiff  sued  the  defendant,  the  owner  of  the  horse,  for 


<27)     20  Johns.  28. 


QUASI-CONTRACTS  207 

the  benefit  so  conferred ;  but  the  court  held  very  properly 
that  no  recoveiy  could  be  had.  The  principle  involved 
may  be  stated  to  be  that  where  a  benefit  has  been  con- 
ferred by  the  plaintiff  upon  the  defendant  but  without  the 
request  of  the  defendant,  he  cannot  recover  for  the  same 
if  he  expected  another  to  pay  him.  In  the  case  just  cited, 
the  plaintiff  was  content  to  bargain  for  the  liability  of 
the  son,  and  so  cannot  hold  the  father  (28). 

§  39.  Improvements  made  in  good  faith  upon  another's 
land.  Suppose  that  A  is  in  the  possession  of  land  which 
really  belongs  to  B,  but  which  A  honestly  believes  is  his 
own,  and  A  proceeds  therefore  to  make  extensive  and  val- 
uable improvements.  According  to  the  principles  of  the 
law  of  real  property  as  enforced  by  the  common  law 
courts,  the  improvements  attached  to  the  realty  become 
a  part  of  it  and  so  belong  to  the  owner  of  the  realty, 
which  in  this  case  is  B's.  If,  therefore,  B  brings  the 
legal  action  known  as  ejectment  he  will  succeed  in  putting 
A  out  of  the  premises.  If  he  does  so  may  A  sue  B  in 
quasi-contract  for  the  value  of  the  improvement?  Sitting 
in  the  United  States  circuit  court  in  the  case  of  Bright 
V.  Boyd  (29),  Mr.  Justice  Story  decided  that  he  might  do 
so  by  a  bill  in  equity,  it  being  equitable  that  he  should  do 
so,  although  he  admitted  that  he  had  very  little  authority 
for  so  holding.  It  can  hardly  be  said  that  the  question 
has  ever  been  clearly  settled,  and  in  many  states  it  is 
now  regulated  by  the  so-called  "betterment  acts"  which 
usually  adopt  a  nile  based  upon  a  view  very  similar  to 


(28)  Cahill  v.  Hall,  161  Mass.  512. 

(29)  1  Story,  478. 


208  QUASI-CONTRACTS 

that  laid  down  by  Story  in  the  case  just  cited.  Upon  one 
point  all  the  cases  seem  to  be  agreed,  namely,  that  when- 
ever in  a  case  of  this  kind  the  person  claiming  the  land 
has  to  appeal  to  a  court  of  equity  for  relief,  he  will  be  re- 
quired as  a  condition  of  obtaining  relief  to  pay  the  value 
of  the  improvements.  This  question  has  arisen  most 
often  in  suits  for  the  redemption  of  premises,  brought  by 
the  mortgagor  against  a  person  in  possession  who,  for 
one  reason  or  another,  supposed  the  right  to  redeem  had 
been  lost  and  so  believed  honestly  that  he  owned  the 
premises  free  from  incumbrances. 

§  40.  Recovery  for  services  rendered  by  a  supposed 
slave.  A  case  which,  in  view  of  the  peonage  cases  in  the 
southern  states,  may  not  be  without  practical  importance 
today  is  Livingstone  v.  Ackestone  (30).  In  this  case 
Ackestone  was  a  negro  held  to  sei-vice  by  the  defendant 
who  bought  him  in  good  faith  as  a  slave.  It  having  turned 
out  that  he  was  not  a  slave,  Ackestone  sued  the  defendant 
for  work  and  labor  performed.  Recovery  was  denied  on 
the  ground  that  the  plaintiff  thought  he  was  a  slave,  and 
so  had  performed  the  services  without  expecting  com- 
pensation ;  but  this  reasoning  seems  hardly  sound,  as  the 
only  basis  for  the  application  of  the  rule  that  one  cannot 
recover  where  he  does  not  expect  compensation,  is  that  one 
cannot  be  allowed  to  turn  a  gift  into  a  sale.  Here,  how- 
ever, no  gift  was  intended — plaintiff  supposed  himself 
bound  by  his  position  as  a  slave  to  render  the  services.  In 
a  number  of  cases  in  which  the  defendant  knew  the  person 
was  not  a  slave  and  still  obtained  the  services  while  con- 


(30)     5  Cow.  531. 


QUASI-CONTRACTS  209 

cealing  the  fact,  a  recovery  was  allowed,  but  upon  the  rea- 
soning in  Livingston  v.  Ackeston  the  plaintiff  would  be 
prevented  from  recovering  here,  it  being  equally  true  that 
the  service  was  rendered  without  any  expectation  of  com- 
pensation or  of  being  paid  for  the  same. 


CHAPTER  IV. 

RECOVERY  FOR  BENEFITS  CONFERRED  UNDER  A 
CONTRACT. 

Section   1.     Benefits  Conferred  Under  a  Mistake  op 

Law. 

§  41.  Distinction  between  law  and  fact.  In  some  of  the 
cases  which  we  have  discussed,  the  benefit  was  con- 
ferred by  plaintiff  upon  the  defendant  under  what  law- 
yers call  a  mistake  of  fact,  as  distinguished  from  a  mis- 
take of  law.  We  must  now  examine,  somewhat  carefully, 
the  distinction  between  these  two  classes  of  mistake.  In 
one  sense  the  rules  of  law  which  govern  the  relations  of 
men  are  facts.  They  are  facts,  for  example,  from  the 
point  of  view  of  the  historian  of  a  legal  system.  For  the 
purposes  of  the  lawyer,  however,  it  is  necessary  to  draw 
the  distinction  between  what  are  called  rules  of  law,  or 
shortly,  the  law,  and  other  facts.  We  may  perhaps  put 
the  matter  as  follows ;  The  law  is  a  body  of  rules  attach- 
ing consequences  to  conduct  or  to  states  of  fact.  The  de- 
fendant did  certain  things  under  certain  surrounding  cir- 
cumstances— these  are  the  facts.  The  rule  which  says 
that,  given  that  state  of  facts,  the  defendant  must  com- 
pensate the  plaintiff  for  the  resulting  damage  is  a  rule 
of  law. 

§  42.    Mistakes  of  law.    It  is  apparent  that  a  plaintiff 

210 


QUASI-CONTRACTS  211 

may  have  paid  the  defendant  money  because  he  was  mis- 
taken as  to  the  facts  (in  the  sense  just  described)  re- 
lating to  a  certain  transaction,  or  it  may  be  that  he  knew 
the  facts,  but  applied  to  them  a  wrong  rule  of  law,  thus 
thinking  himself  liable  to  pay  when  he  was  not.  It  is 
clearly  settled  that  if  the  mistake  of  the  plaintiff  be  one 
of  fact,  he  may  recover  from  the  defendant  the  value  of 
the  benefits  conferred  because  of  the  mistake.  Should  it 
make  any  difference  if  the  mistake  be  one  of  law?  Appar- 
ently not.  The  unjust  enrichment  is  as  great  in  the  one 
case  as  in  the  other.  The  law  however  seems  to  be  that 
he  cannot  recover  (except  in  certain  cases)  if  money  be 
paid  or  property  be  delivered  under  a  mistake  of  law.  No 
sound  reason,  it  seems,  has  ever  been  given  for  this  rule. 
Apparently  it  had  its  origin  in  a  misstatement  by  Lord 
Ellenborough  in  1802  of  the  maxim  that  ''Ignorance  of  the 
law  excuses  no  man, ' '  his  rendering  of  which  was  as  fol- 
lows :  ' '  Every  man  must  be  taken  to  be  cognizant  of  the 
law"  (1) — a  statement  which  was  not,  and  never  had 
been,  a  legal  principle.  Acting  upon  his  statement,  many 
courts  apply  the  supposed  principle  logically  and  permit 
no  recovery  in  quasi-contract  where  the  mistake  was  as 
to  the  law.  There  has  been,  however,  more  or  less  con- 
sciously, a  decided  attempt  on  the  part  of  many  courts 
to  limit  this  doctrine  as  much  as  possible,  and  in  a  few 
jurisdictions  perhaps  even  to  get  away  from  it  entirely. 
In  time  the  law  may  be  modified  to  accord  with  sound 
principle  in  this  respect.  Space  fails  in  which  to  go  into 
detail  regarding  the  limits  placed  by  the  courts  upon  the 


(1)     Bilbie  v.  Lumley,  2  East.  469. 


212  QUASI-CONTRACTS 

doctrine,  but  chief  among  them  is  the  rule  that  the  gov- 
ernment or  a  public  corporation  (city,  town,  village,  or 
county)  may  recover  money  paid  under  a  mistake  of  law 
by  the  disbursing  officer  of  the  government  or  public  cor- 
poration. It  is  also  held  that  a  court  will  compel  its  own 
officers  to  do  equity,  and  therefore,  when  a  receiver  ap- 
pointed by  the  court  has  had  money  paid  to  him  under  a 
mistake  of  law,  he  will  be  compelled  to  refund  it.  For 
further  details  see  the  article  on  Equity  in  Volume  VI  of 
this  work. 

Section  2.     Benefits  Conferred  Under  a  Mistake  of 

Fact. 

§  43.  MistaJje  of  fact  as  to  existence  of  contract.  As- 
suming that  the  mistake  is  one  of  fact  and  not  of  law,  let 
us  examine  the  question  of  recovery  where  money  is  paid 
or  property  transferred  in  the  belief  that  a  contract  has 
been  entered  into,  and  it  turns  out  that  such  is  not  the 
fact.  May  the  one  who  has  parted  with  his  money  or  hi? 
property  recover  the  value  of  the  same?  This  question 
was  involved  in  Martin  v.  Sitweli  (2)  in  which  the  plain- 
tiff paid  the  defendant  for  a  policy  of  insurance  on  cer- 
tain goods  supposed  to  be  on  board  a  certain  vessel.  In 
fact  the  goods  were  not  on  board,  and  the  policy  was 
therefore  void.  The  court  held  that,  since  the  plaintiff 
had  failed  to  receive  what  he  bargained  for,  namely,  the 
binding  promise  of  the  defendant,  he  could  recover  in 
general  assumpsit  the  amount  paid.  Similarly  in  Van 
Deusen  v.  Blum  (3)  plaintiff  furnished  to  a  partnership 

(2)  1  Shower  156. 

(3)  18  Pick.  (Mass.)  220. 


QUASI-CONTRACTS  213 

labor  and  materials,  in  pursnance,  as  he  supposed,  of  a 
contract  binding  on  the  defendants,  who  were  carrying 
on  business  as  co-partners.  It  appeared  that  the  member 
of  the  firm  who  signed  and  sealed  the  contract  on  behalf 
of  the  firm  had  no  authority  to  enter  into  sealed  contracts 
binding  the  firm,  and  the  plaintiff  therefore  could  not 
recover  the  contract  price.  It  was  held,  however,  that  he 
could  recover  in  quasi-contract  the  reasonable  value  of 
the  labor  and  materials  furnished. 

§  44.    Mistake  as  to  the  subject  matter  of  the  contract. 

Suppose  the  plaintiff  has  bought  and  paid  for  something 
which  turns  out  to  have  no  existence.  That  is  to  say,  a 
mistake  of  fact  is  made  as  to  the  existence  of  the  thing 
which  formed  the  subject  matter  of  the  contract.  It  is 
clear  that  a  recovery  will  be  allowed  in  such  a  case.  For 
example,  in  D'Utricht  v.  Melchor  (4)  the  plaintiff  bought 
what  he  supposed  was  a  tract  of  land  from  the  defendant 
who  had,  as  he  thought,  bought  it  of  another  person.  But 
upon  investigation  no  land  corresponding  to  the  descrip- 
tion in  the  deed  could  be  found.  Plaintiff  was  allowed 
to  recover  from  the  defendant  the  consideration  which  he 
had  paid.  An  excellent  illustration  of  the  fundamental 
principle  which  imderlies  nearly  all  quasi-contracts  is 
seen  in  the  case  of  Jones  v.  Eyde  (5),  in  which  it  appeared 
that  the  defendant  had  sold  the  plaintiff  a  naval  bond 
which  had  ceased  to  be  valid  because  its  amount  had  been 
fraudulently  raised.  The  government,  however,  although 
under  no  legal  obligation  to  do  so,  paid  the  plaintiff  the 


(4)  1  DaU.  (U.  S.)  428. 

(5)  5  Taunt.  488. 


Vol.  1—19 


214  QUASI-CONTRACTS 

amount  for  which  it  was  originally  issued.  In  a  suit  by 
the  plaintiff  against  the  defendant,  he  was  allowed  to 
recover  what  he  had  paid  the  defendant,  less  what  he  had 
received  from  the  government— that  is,  the  amount  of 
the  unjust  enrichment  of  the  defendant  at  the  expense 
of  the  plaintiff. 

§  45.  Mistake  as  to  title  of  seller:  Personal  property. 
Suppose  i  buy  a  horse  of  A,  paying  him  cash,  and  later 
it  tui-ns  out  that  he  had  no  title  and  I  am  compelled  to 
surrender  the  horse  to  the  rightful  owner.  May  I  re- 
cover from  A  the  price  paid?  Curiously  enough  the  an- 
swer to  this  question  was  for  a  long  time  in  doubt,  owing 
to  the  supposed  meaning  of  the  doctrine  of  caveat  emptor 
(let  the  buyer  beware).  It  was  argued  that  the  plaintiff, 
the  buyer,  took  the  risk  of  the  defendant  having  the  title. 
Not  until  1864  was  the  question  finally  settled  in  England, 
when  it  was  laid  down  that  when  one  sells  as  his  own  per- 
sonal property  which  belongs  to  another,  he  must  repay 
to  the  buyer  the  money  received  for  the  same.  This  de- 
cision was  reached  in  the  case  of  Eichholz  v.  Bannister 
(6),  the  court  holding  that  where  the  defendant  sold  the 
property  as  his  own,  there  was  an  implied  warranty  by 
the  seller  that  he  had  title.  In  the  earlier  case  of  Morley 
V.  Attenboro  (7),  the  defendant  was  a  pawnbroker  and 
plaintiff  bought  from  him  property  which  he  knew  was 
pawned  to  the  defendant,  the  time  for  the  redemption  by 
the  pawnor  having  expired.    It  appeared  that  the  article 


(6)  17  C.  B.   (N.  S.)  708. 

(7)  3  Ex.  500. 


QUASI-CONTRACTS  215 

had  been  pawned  by  one  who  did  not  own  it,  and  of  course 
the  pawnbroker  had  no  title.  It  was  held  however  that  the 
pawnbroker  in  such  a  case  was  not  to  be  regarded  as  sell- 
ing the  goods  as  his  own  or  as  representing  anything 
more  than  that  so  far  as  he  knew  his  title  was  good.  The 
risk,  therefore,  of  the  title  being  good,  was  held  to  be  on 
the  plaintiff  and  a  recovery  was  denied.  The  whole  ques- 
tion, therefore,  appears  in  these  cases  to  turn  on  the  ex- 
istence of  a  warranty  in  fact,  express  or  implied.  No 
recovery  can  be  had  upon  a  quasi-contractual  basis. 

§  46.  Same:  Real  property.  In  the  case  of  real  prop- 
erty, owing  to  the  forms  used  in  deeds  conveying  title 
to  realty,  different  considerations  govern  the  question. 
For  our  purpose,  deeds  conveying  title  to  realty  may  be 
divided  into  two  classes:  (1)  those  that  contain  covenants 
of  warranty,  that  is,  covenants  guaranteeing  that  the 
seller  has  a  good  title;  and,  (2)  quit-claim  deeds,  which 
contain  no  such  provision,  but  purport  to  convey  to  the 
grantee  only  whatever  title  the  grantor  has.  Given  the 
existence  of  these  two  classes  of  deeds,  it  seems  clear  that 
one  who  has  taken  a  quit-claim  deed  must  understand  that 
his  grantor  does  not  warrant  or  represent  that  he  has 
title,  for  if  he  did,  a  warranty  deed  would  be  the  natural 
thing  to  give.  Upon  this  principle  the  cases  relating  to 
realty  are  settled,  and  apparently  there  has  never  been 
any  doubt  upon  the  subject  in  any  of  the  reported  cases. 
Here  again,  therefore,  the  recovery  if  one  can  be  had, 
must  be  upon  an  actual  contract  of  warranty,  and  not 
upon  a  quasi-contract. 


216  QUASI-CONTRACTS 

Section  3.    Plaintiff  in  Default  Under  a  Contract. 

§  47.  Wilful  default.  In  the  cases  with  which  we  shall 
deal  in  this  section  it  is  assumed  that  the  plaintiff,  al- 
though he  has  partially  performed,  has  been  guilty  of  a 
breach  of  his  promise  of  such  a  character  that  he  cannot 
recover  from  the  defendant  for  a  breach  of  the  contract. 
What  will  amount  to  such  a  breach  is  discussed  in  the 
article  on  Contracts  elsewhere  in  this  volume.  Any  right 
of  the  plaintiff  to  recover  in  a  case  of  this  kind, 
must,  therefore,  from  the  nature  of  things,  be  quasi-con- 
tractual, and  rest  upon  the  fundamental  principle  of 
unjust  enrichment.  Not  only,  in  a  case  of  this  kind,  is 
the  plaintiff  precluded  from  suing  the  defendant  for  a 
breach  of  the  actual  contract  but,  in  addition,  the  defend- 
ant has  an  action  against  the  plaintiff  for  the  failure 
of  the  latter  to  perfonu  his  promise.  Suppose  now  under 
these  circumstances  the  plaintiff  had,  before  the  breach 
on  his  part,  partially  performed  his  promise,  and  so  had 
conferred  a  benefit  upon  the  defendant,  so  as  to  result 
in  an  enrichment  of  the  defendant  at  the  expense  of  the 
plaintiff.  The  generally  accepted  doctrine  seems  to  be 
that  the  plaintiff  is  not  in  a  case  of  this  kind  entitled  to 
recover  anything,  on  the  ground  that  it  is  his  own  fault 
that  the  condition  of  which  he  complains  has  arisen.  For 
example,  in  Champlin  v.  Rowley  (8)  the  plaintiff  sued 
the  defendant  for  hay  sold  and  delivered.  The  plaintiff 
had  agreed  to  deliver  a  hundred  tons  of  hay  on  certain 
dates  at  an  agreed  price  per  ton.  The  plaintiff  had  de- 
livered only  52  tons  and  offered  no  excuse  for  failiw  to 

(8)     18  Wend.  (N.  Y.)  187. 


QUASI-CONTRACTS  217 

deliver  the  balance.  His  action  was  to  recover  for  the 
hay  actually  delivered.  The  court  decided  that  the  plain- 
tiff could  recover  nothing,  on  the  ground  that  the  de- 
fendant, when  he  accepted  the  hay  that  was  delivered,  did 
so  in  the  expectation  that  the  plaintiff  would  deliver  the 
balance,  and  so  cannot  b'e  held  to  have  waived  the  right 
to  call  for  the  balance  or  in  any  way  to  have  consented  to 
or  condoned  the  plaintiff's  breach. 

§  48.  Inexcusable  but  not  wilful  default.  It  sometimes 
happens  that  the  plaintiff"  acting  in  good  faith  has  unin- 
tentionally but  inexcusably  failed  to  perform  a  term  in 
a  contract,  the  performance  of  which  is  indispensable  to 
a  recovery  on  his  part  upon  the  contract  itself.  May  he 
in  a  case  of  this  kind  recover  anything  in  a  quasi-con- 
tractual action,  if  he  has,  in  part  performance  of  his 
promise,  conferred  benefits  upon  the  defendant?  Upon 
this  point  there  seems  to  be  a  conflict  of  authority.  For 
example,  in  Blood  v.  Wilson  (9)  the  law  is  stated  as  fol- 
lows :  "It  is  well  settled  in  this  commonwealth  that  when 
the  special  contract  has  not  been  fully  performed,  but  the 
plaintiff  has  in  good  faith  done  what  he  believes  to  be 
a  compliance  with  the  contract,  and  has  thus  rendered  a 
benefit  to  the  defendant,  he  can  recover  the  value  of  his 
services  not  exceeding  the  contract  price,  after  deducting 
the  damages  which  the  defendant  has  sustained  by  the 
breach  of  the  contract." 

In  other  jurisdictions,  however,  a  recovery  under  sim- 
ilar circumstances  is  denied. 

§  49.    Performance   impossible.    In   other   cases   the 


(9)     141  Mass.  25. 


218  QUASI-CONTRACTS 

plaintiff,  by  reason  of  the  non-perfonnance  of  a  term  of 
the  contract,  has  lost  any  right  to  call  upon  the  defendant 
for  performance,  and  yet  is  not  liable  to  a  suit  by  the 
defendant  for  his  non-performance,  for  the  reason  that 
performance  had  become  impossible,  owing  to  circum- 
stances beyond  the  plaintiff's  control.  Under  such  cir- 
cumstances neither  party  can  hold  the  other  to  the  terms 
of  the  contract.  Can  the  law,  consistently  with  the  ex- 
istence of  the  terms  of  the  contract,  compel  the  defendant 
to  pay  the  plaintiff  for  any  benefit  which  he  may  have  re- 
ceived from  the  plaintiff  by  reason  of  the  part  perform- 
ance? The  English  courts  apparently  deny  that  the  plain, 
tiff  can  recover  in  any  case  of  this  kind,  but  in  many 
American  jurisdictions  a  recovery  is  allowed,  if  to  do 
so  is  not  inconsistent  with  the  purpose  for  which  the  term 
of  the  contract  which  has  been  broken  was  inserted.  For 
example,  in  Parker  v.  Macomber  (10)  the  plaintiff  sued 
for  the  value  of  services  rendered  the  defendant  under 
the  following  circumstances:  The  plaintiff  agreed  with 
the  defendant  that  the  plaintiff  and  his  wife  would  live 
in  the  house  of  the  defendant  and  care  for  and  maintain 
her  during  her  natural  life,  and  the  defendant  agreed 
that  in  consideration  of  these  services  she  would  charge 
no  rent  for  the  house  and  pay  eight  dollars  per  month 
board.  The  plaintiff's  wife  died  before  the  defendant,  so 
that  the  agreement  could  not  be  carried  out  for  its  whole 
term.  Plaintiff  thereupon  furnished  a  housekeeper  in 
place  of  the  wife  for  a  time,  but  the  defendant  shortly 
thereafter  notified  the  plaintiff  to  leave,  which  the  plain- 

(10)     17  R.  I.  674. 


QUASI-CONTRACTS  219 

tiff  did.  The  court,  after  deciding  that  the  defendant 
had  a  right  to  treat  the  contract  as  at  an  end,  because  the 
plaintiff  could  not  perform  it  according  to  its  conditions, 
held  that,  as  the  death  of  the  wife  rendered  the  plaintiff 's 
default  excusable,  he  could  recover  the  reasonable  value 
of  the  services  actually  rendered.  The  view  of  the  court 
seems  to  be  that  the  situation  which  arose  was  n-ot  one 
within  the  contemplation  of  the  parties  at  the  time  the 
agreement  was  made,  and  therefore  to  allow  a  recovery 
is  not  inconsistent  with  any  purpose  for  which  the  term 
of  the  contract  requiring  performance  by  the  plaintiff  was 
inserted.  In  accordance  with  this  principle,  it  has  been 
held  that  while  ordinarily  a  plaintiff  who  is  prevented  by 
sickness  from  performing  the  full  services  contracted 
for  may  recover  for  the  services  rendered,  he  cannot  do 
so  if  the  sickness  should  have  been  foreseen  (11). 

§  50.    Plaintiff  able  to  plead  the  statute  of  frauds. 

Suppose  that,  in  any  of  the  cases  previously  discussed  in 
this  section,  the  plaintiff  although  in  default  may  defeat 
any  action  by  the  defendant  for  breach  of  the  contract  by 
pleading  the  statute  of  frauds.  Will  this  alter  the  situa- 
tion ?  It  would  seem  not.  If  we  take  the  view  of  the  effect 
of  the  statute  of  frauds  which  is  held  by  a  majority  of 
the  courts,  namely,  that  it  does  not  render  the  agreement 
a  legal  nullity,  but  merely  gives  to  the  person  sought  to 
be  charged  on  it  a  defense  which  he  may  set  up  if  he 
wishes,  the  situation  seems  to  be  as  follows :  The  plain- 
tiff has  given  the  defendant  a  right  to  sue  for  breach  of 
the  contract,  to  which,  however,  the  plaintiff  has  a  de- 


(11)     Jennings  v.  Lyon,  39  Wis.  553. 


220  QUASI-CONTRACTS 

fense.  How  can  the  existence  of  this  right  on  the  part 
of  the  plaintiff  to  defeat  the  defendant  if  the  latter  sue 
him  for  breach  of  the  contract,  give  him  any  greater 
rights  to  sue  the  defendant  on  a  quasi-contractual  basis 
for  benefits  conferred  by  his  })erformance,  than  he  has 
in  the  case  where  he  has  no  defense  to  a  similar  suit  by 
the  defendant?  Exempting  him  from  all  liability  for 
damage  inflicted  on  the  defendant  by  his  failure  to  keep 
his  promise  certainly  cannot  strengthen  his  position  as 
a  plaintiff  in  the  quasi-contractual  action.  If  on  the 
other  hand,  we  take  the  view  of  a  minority  of  the  courts, 
that  the  effect  of  the  statute  is  to  render  the  agreement 
a  legal  nullity,  that  is,  no  contract  at  all,  it  would  seem 
that  the  result  ought  to  be  the  same.  Under  this  view  of 
the  statute,  the  plaintiff  has  conferred  a  benefit  upon  the 
defendant  and  it  was  not  conferred  (as  in  the  other  case) 
in  pursuance  of  a  contractual  duty  to  do  so ;  but  can  the 
plaintiff  complain  of  anything  inequitable  in  the  conduct 
of  the  defendant,  when  he  refuses  to  pay  anything  until 
the  plaintiff  carries  out  his  promise!  It  would  seem  not. 
But  apparently,  as  far  as  the  question  has  been  passed 
upon  by  the  courts  which  take  this  second  view  of  the 
statute,  it  is  held  that  the  plaintiff  is  entitled  to  recover 
in  quasi-contract  the  value  of  the  benefits  conferred  even 
though  he  has  broken  his  promise  wilfully. 

§  51.  Performance  illegal.  Suppose  the  contract  be- 
tween the  plaintiff  and  defendant  involves  the  doing  of 
illegal  acts,  and  that,  after  performance  in  part  by  doing 
certain  legal  acts  and  conferring  a  benefit  thereby  upon 
the  defendant,  the  plaintiff  seeks  to  disaffirm  the  agree- 


QUASI-CONTRACTS  221 

ment  because  of  its  illegality  and  to  recover  the  value  of 
the  benefits  conferred.  In  this  connection  it  becomes  im- 
portant to  distinguish  between  acts  which  are  regarded 
by  the  law  as  illegal  because  immoral  or  evil  from  their 
very  nature  (malum  in  se),  and  acts  which  are  illegal  be- 
cause prohibited  by  the  law,  although  in  and  of  them- 
selves they  are  innocent  (malum  prohibitum).  If  the  act 
which  makes  the  agreement  illegal  is  malum  in  se  the 
plaintiff,  although  he  sues  ii*  disaffirmance  of  the  agree- 
ment, is  not  permitted  to  recover.  On  the  other  hand,  if 
the  illegality  arises  from  an  act  which  is  merely  malum 
prohibitum,  the  plaintiff,  on  disaffirming  the  contract,  may 
recover  the  benefits  conferred.  For  example,  a  statute 
of  Massachusetts  prohibited  bankers  from  agreeing  to 
pay  money  at  a  fixed  time  in  the  future.  The  plaintiff 
deposited  money  with  the  defendant  under  an  agreement 
of  this  kind.  The  court  held  that  he  might  recover  in  a 
count  for  money  had  and  received,  brought  in  disaffirm- 
ance of  the  agreement  and  before  the  expiration  of  the 
time  named  on  the  ground  that  the  act  in  question  was 
malum  prohibitum  only  (12). 

Section  4.    Defendant  in  Default  Under  a  Contract. 

§  52.  Defendant  v^dlfully  or  inexcusably  in  default. 
If  there  be  a  valid  and  enforceable  contract  between  the 
plaintiff  and  the  defendant,  and  the  defendant  is  guilty 
of  a  wilful,  or  a  legally  inexcusable  but  not  wilful,  breach 
of  the  same,  the  plaintiff  may  of  course  sue  for  the  dam- 
ages due  to  the  breach.    Our  question  however  is,  may  the 


(12)     White  V.  Franklin  Bank,  22  Pick.  (Mass.)  181. 


222  QUASI-CONTRACTS 

plaintiff  say  to  the  defendant:  ''You  have  chosen  to 
break  the  contract ;  the  result  is  that  I  am  freed  from  all 
obligation  to  perform,  and  I  may  therefore  treat  the 
contract  as  ended.  I  am,  as  a  result,  entitled  to  sue  in 
quasi-contract  to  recover  the  value  of  the  benefits  which 
I  have  conferred  upon  you  by  way  of  part  or  full  per- 
formance of  my  promises  before  you  were  guilty  of  the 
breach."  In  the  case  of  Nash  v.  Towne  (13)  the  Supreme 
Court  of  the  United  States  decided  that  the  plaintiff  was 
entitled  to  do  so.  The  facts  were  as  follows:  The  plain- 
tiff paid  the  defendant  $5,500,  in  consideration  for  which 
the  defendant  sold  to  the  plaintiff  certain  wheat  which 
the  defendant  had.  The  wheat  was  left  in  the  possession 
of  the  defendant,  and,  instead  of  delivering  it  according 
to  the  agreement,  the  defendant  sold  and  delivered  it  to 
other  parties.  The  plaintiff  thereupon  sued,  not  to  re- 
cover damages  for  the  breach  of  the  promise  to  deliver, 
nor  in  tort  for  the  conversion  of  the  wheat  (the  court 
holding  that  the  title  to  the  wheat  passed  to  the  plaintiff 
at  the  time  the  contract  was  made),  nor  in  quasi-contract 
for  the  money  received  by  the  defendant  for  the  wheat 
from  the  third  party  to  whom  he  sold  it ;  but  for  money 
had  and  received  in  the  shape  of  the  amount  the  plain- 
tiff had  paid  the  defendant.  The  court  decided  that  the 
plaintiff  was  entitled  to  recover  this  amount. 

In  order  to  permit  the  plaintiff  to  sue  in  quasi-contract 
in  a  case  of  this  kind,  it  must  appear  not  only  that  the 
defendant  has  been  guilty  of  a  breach  of  the  contract,  but 
that  the  breach  is  of  a  sufficiently  serious  character  to  en- 


ds)    5  Wall.  689. 


QUASI-CONTRACTS  223 

title  the  plaintiff  to  consider  the  contract  as  repudiated 
by  the  defendant  and  so  at  an  end.    It  is  also  held  in 
cases  of  this  kind  that  if  the  plaintiff  received  anything 
from  the  defendant  in  part  performance  of  his  promise, 
the  plaintiff  must  restore  or  offer  to  restore  the  same  to 
the  defendant  as  a  condition  of  demanding  the  return  of 
what  he  gave  the  defendant.    For  example,  in  Miner  v. 
Bradley  (14)  the  plaintiff  had  agreed  to  buy  from  the 
defendant  a  cow  and  some  hay,  for  a  lump  sum.     The 
plaintiff"  had  paid  for  both,  and  had  received  the  cow. 
The  defendant  refused  to  deliver  the  hay,  and  the  plain- 
tiff brought  an  action  to  recover  the  amount  paid,  but 
failed  to  offer  the  return  of  the  cow.    It  was  held  that  he 
could  not  recover.    It  is  of  course  sufficient  for  the  plain- 
tiff to  offer  to  return  the  things  received  from  the  defend- 
ant; a  refusal  from  the  defendant  to  accept  them  does 
not  prevent  the  plaintiff's  action  from  arising  (15). 

§  53.  Performance  impossible.  If,  after  the  plaintiff 
has  performed  the  contract  in  whole  or  in  part,  perform- 
ance by  the  defendant  is  rendered  impossible  by  circum- 
stances for  which  the  defendant  is  not  legally  responsible, 
the  defendant  is  thereby  excused  from  performing  so  that 
he  is  not  liable  to  an  action  for  breach  of  the  contract. 
It  by  no  means  follows  that  the  defendant  is  to  be  al- 
lowed to  retain  the  benefits  which  he  has  received  from  the 
plaintiff  without  paying  for  them.  To  allow  him  to  do 
so  would  be  clearly  inequitable.  It  is  accordingly  held, 
at  least  by    the  American  authorities,  that  the  plaintiff 


(14)  22  Pick.  (Mass.)  457. 

(15)  Terry  v.  Allis,  16  Wis.  478. 


224  QUASI-CONTRACTS 

may  recover  in  quasi-contract  the  value  of  the  benefits 
conferred  under  such  circumstances.     For  example,  in 
Reina  v.  Cross  (16)  the  plaintiff  sought  to  recover  sums 
paid  in  advance  to  the  master  of  a  vessel  for  freight  on 
goods  to  be  transported  by  the  vessel.     The  vessel  was 
shipwrecked  and  lost.     It  was  held  that  the  plaintiff  could 
recover.     The  English  authorities  take  the  opposite  view. 
In  Byrne  v.  Schiller  (17),  Cockburn,  C.  J.,  after  stating 
the  English  law,  said:    *'I  regret  that  the  law  is  so.     I 
think  it  founded  upon  an  erroneous  principle  and  any- 
thing but  sound;  and  I  am  emboldened  to  say  this  by 
finding  that  the  American  authorities  have  settled  the  law 
upon  directly  opposite  principles,  and  that  the  law  of 
every  European  country  is  in  conformity  to  the  American 
doctrine  and  contrary  to  ours." 

§  54.    Defendant  able  to  plead  the  statute  of  frauds. 

Suppose  that  the  agreement  made  between  the  plaintiff 
and  defendant  is  unenforceable  because  within  the  provis- 
ions of  the  statute  of  frauds,  so  that  the  defendant,  if 
sued  upon  the  contract,  may  plead  the  statute  as  a  de- 
fense. May  the  plaintiff,  who  under  these  circumstances 
has  in  partial  performance  of  his  promise  conferred  a 
benefit  upon  the  defendant,  recover  the  value  of  the  same 
in  quasi-contract?  Let  us  take  a  concrete  case:  An 
agreement  not  to  be  performed  within  a  year  is  in  many 
jurisdictions  not  enforceable  unless  in  writing.  Suppose 
the  plaintiff  and  the  defendant  have  orally  agreed  that 
the  plaintiff  shall  perform  work  and  labor  for  the  de- 


(16)  6  Cal.  29. 

(17)  L.  R.  6  Ex.  319. 


QUASI-CONTRACTS  225 

fendant  for  a  period  exceeding  a  year,  the  defendant  to 
pay  the  plaintiff  a  lump  sum  at  the  end  of  the  period.  If 
the  plaintiff,  in  pursuance  of  the  oral  agreement,  has 
partially  or  fully  performed  his  promise,  he  is  neverthe- 
less forbidden  by  the  statute  from  suing  on  the  contract. 
Clearly,  however,  it  is  not  just  for  the  defendant  to  ap- 
propriate the  plaintiff's  services  for  nothing,  and  the 
courts  accordingly  hold  that  the  plaintiff  may  recover  the 
reasonable  value  of  the  services  rendered.  The  statute 
simply  says  that  the  plaintiff  shall  not  hold  the  defendant 
upon  the  contract ;  to  compel  him,  on  the  principle  of  un- 
just enrichment,  to  pay  the  plaintiff  the  reasonable  value 
of  the  services  obtained  is  not  in  any  way  to  enforce  the 
contract.  The  same  result  is  reached,  apparently, 
whether  the  effect  of  the  statute  is  regarded  as  simply 
rendering  the  contract  unenforceable  or  as  making  it  a 
legal  nullity  (18). 

§  55.  Performance  illegal.  In  the  class  of  cases  which 
we  have  now  to  consider,  the  defendant,  it  is  assumed,  has 
been  guilty  of  the  breach  of  an  illegal  agreement,  and  in 
addition  to  breaking  his  agreement,  insists  upon  retain- 
ing the  benefits  which  he  has  received  from  the  plaintiff 
in  part  performance  of  his  promise.  May  he  do  so  or 
must  he  restore  to  the  plaintiff  the  value  of  the  benefits 
thus  received?  Attention  has  already  been  called  in 
another  place  (19)  to  the  rule  that  the  court  refuses  to  im- 
pose, upon  the  principles  of  unjust  enrichment,  an  obliga- 
tion upon  the  defendant  in  favor  of  a  plaintiff  who,  in 


(18)  Ellis  V.  Carey,  74  Wis.  176;  Wonaettler  v.  Lee,  40  Kan.  367. 

(19)  See  §  26,  above. 


226  QUASI-CONTRACTS 

the  eyes  of  the  courts,  is  equally  guilty  with  the  defendant 
of  engaging  in  an  illegal  transaction.  This  rule  obvious- 
ly applies  here.  No  matter  how  much  the  defendant  has 
received  from  the  plaintiff,  if  the  plaintiff  is  equally 
guilty  with  the  defendant,  the  plaintiff  can  recover  noth- 
ing (20). 


(20)     Morgan  v,  Grofl,  5  Den.  (N.  Y.)  364. 


CHAPTER  V. 

QUASI-CONTRACTUAL  OBLIGATIONS  IN  THE  LAW  OF 

PERSONS. 

§  56.    Liability  of  infant  for  necessaries.    According 
to  the  law  of  contracts,  an  infant  may  plead  the  fact  of 
his  infancy  as  a  personal  defense,  when  sued  upon  an 
agreement  he  has  made.    It  is  often  said  that  this  is  not 
true  of  agreements  made  by  infants  to  pay  for  neces- 
saries furnished.     It  seems,  however,  that  even  where 
the  promise  of  the  infant  is  made  in  consideration  of 
necessaries  furnished  him,  he  may  plead  his  infancy  to 
any  suit  upon  his  actual  promise;  but  that  the  law  im- 
poses upon  him  a  duty,  on  the  basis  of  the  principle  of 
unjust  enrichment,  to  pay  the  reasonable  value  of  the 
necessaries  received.     It  must  be  admitted  that  there  is 
considerable  confusion  in  the  cases  upon  this  point,  but 
when  we  remember  that  in  an  action  against  an  infant 
for  the  value  of  necessaries  furnished,  the  infant  is  com- 
pelled to  pay,  not  the  price  agreed  upon,  but  only  the  reas- 
onable value  of  the  necessaries,  the    quasi-contractual 
nature  of  the  obligation  is  clearly  apparent  (1).     See 
Part  IV  of  the  article  on  Domestic  Relations  and  Persona 
in  Volume  II  of  this  work. 

^  57.    Liability  of  insane  person  for  necessaiies.    No 
general  statement  can  be  made  which  will  apply  in  all 


(1)     Trainer  v.  Trumbull,  141  Mass.  527. 

227 


228  QUASI-CONTRACTS 

jurisdictions  as  to  the  contractual  capacity  of  an  insane 
person.  In  some  jurisdictions  the  courts  deny  that  he  is 
capable  of  making  any  contracts  whatever.  In  others  he 
has  a  certain  limited  capacity  to  contract.  See  the  article 
on  Contracts,  §§68-72,  earlier  in  this  volume.  In  all  juris- 
dictions, however,  whatever  view  may  be  taken  of  his 
contractual  capacity,  he  may  be  sued  in  an  action  of  as- 
sumpsit to  recover  the  reasonable  value  of  neoessaries 
furnished.  It  is  clear  that  this  obligation  also,  like  that 
of  an  infant,  is  a  duty  imposed  by  law  upon  the  principle 
of  unjust  enrichmen-t  (2). 

§  58.  Liability  of  husband  for  wife's  necessaries.  It 
is  often  stated  that  a  wife  has  an  implied  authority  to 
pledge  her  husband's  credit  for  necessaries  furnished 
her.  The  truth  of  this  statement  depends  upon  the  cir- 
cumstances. If  the  wife  be  living  at  home  with  her  hus- 
band and  has  been  permitted  by  the  husband  to  order 
supplies  of  different  kinds  for  the  household,  and  the  hus- 
band has  been  in  the  habit  of  paying  for  them,  we  have 
to  do  with  a  simple  case  of  agency.  Suppose,  however, 
the  husband,  the  wife  not  being  at  fault  in  any  way,  has 
refused  to  furnish  the  wife  the  necessaries  of  existence. 
It  is  well  settled  that,  under  these  circumstances,  even 
though  the  husband  notifies  all  persons  that  he  will  not 
pay  for  things  furnished  his  wife,  anyone  to  whom  the 
wife  applies  may  furnish  the  wife  with  necessaries  upon 
the  credit  of  the  husband,  and  thereafter  sue  the  husband 
to  recover  the  reasonable  value  of  the  necessaries  fur- 
nished.   Obviously,  in  a  case  of  this  kind,  the  wife  has 


(2)    Rhodes  y.  Rhodes,  44  Ch.  D.  94,  106, 


QUASI-CONTRACTS  229 

no  actual  authority  from  the  husband  to  pledge  his  credit. 
A  more  extreme  case  will  perhaps  bring  out  the  true 
situation.  Suppose  the  wife,  driven  out  of  house  and 
home  by  the  husband  through  no  fault  on  her  part,  is 
found  in  an  unconscious  condition  by  the  plaintiff,  and 
he  furnishes  the  necessary  shelter  and  medical  attendance 
required  by  the  circumstances.  Without  doubt  the  plain- 
tiff may  in  such  a  case  recover  from  the  husband  the 
reasonable  value  of  the  services  rendered.  If  under  such 
circumstances  the  wife  should  die  and  the  plaintiff  should 
pay  the  necessary  funeral  expenses  incurred,  he  could 
undoubtedly  recover  in  quasi-contract  from  the  husband 
for  the  expenditure  (3),  See  Part  II  of  the  article  on 
Domestic  Relations  and  Persons  in  Volume  II  of  thia 
work. 

§  59.  Liability  of  father  for  necessaries  furnished 
child.  In  some,  but  not  all,  jurisdictions  the  father  is  re- 
garded as  being  under  a  legal  duty  to  support  his  child. 
His  duty  to  pay  a  third  person,  who  has  furnished  neces- 
saries to  the  child  whom  the  father  has  refused  to  sup- 
port, is  clearly  another  quasi-contractual  obligation  (4). 
See  Part  III  of  the  article  on  Domestic  Relations  and  Per- 
sons in  Volume  II  of  this  work. 


(3)  Jenkins  v.  Tucker,  1  H.  Bl.  90. 

(4)  GiUey  v.  Gilley,  79  Me.  292. 


>oi.  I— ao 


AGENCY. 


CHARLES  ANDREWS  HUSTON, 

A.   B.    (University  of  Cliloairo> 
J.  D.    (Uulvoriilty  ot    Clilca^o) 


Dean  of  Law  School.  Ldand  Staaford.  Jr..   Lai.cfsity. 


CHAPTEK  1. 

FUNDAMENTAL  CONCEPTIONS. 

§  1.  The  function  of  agency.  Tlie  size  and  complexity 
of  the  modern  business  enterprise  make  action  through 
representatives  a  necessary  supplement  to  direct  and  per- 
sonal action.  Undertakings  inv^olving  special  knowledge 
or  skill,  transactions  taking  place  in  widely  separated 
parts  of  the  world,  form  part  of  a  business  under  a  single 
head.  Con^rate  organization  necessarily  involves  action 
through  representatives.  An  insurance  company  with  its 
management  resident  in  New  York,  if  it  wishes  to  write 
policies  in  San  Francisco,  will  find  it  practically  neces- 
sary to  appoint  a  representative  to  act  for  it  there.    In 

230 


AGENCY  231 

general  such  a  representative,  authoiized  by  a  competent 
person  to  act,  and  ac^ting  under  his  direction  and  control, 
is  an  agent,  and  the  authorizing  person  is  called  a  prin- 
cipal. It  should  be  observed,  however,  that  an  agent  is 
only  one  type  of  representative  through  whom  a  principal 
may  accomplish  his  ends.  He  is  to  be  distinguished  from 
other  representatives  chiefly  by  the  facts  that  he  owes  his 
appointment  to  the  principal  and  is  subject  to  the  prin- 
cipal's direction  in  the  details  of  execution  of  the  task  he 
is  authorized  to  perform. 

§2.  Agent  and  servant:  Definitions.  In  its  broader 
sense  the  word  agent  denotes  a  person  who  represents  his 
principal  and  acts  under  his  direction,  whether  in  per- 
forming merely  operative  acts  or  in  bringing  tlie  prin- 
cipal into  relation  with  third  parties.  More  narrowly, 
when  the  employment  does  not  necessarily  involve  a  third 
party  in  relations  with  the  i)rincipal — for  instance  when 
it  is  such  an  operative  act  as  })lowing  the  principal's  field 
or  painting  his  portrait — the  relation  is  spoken  of  as  that 
of  master  and  servant,  and  the  relation  of  principal  and 
agent  is  confined  to  the  bringing  of  the  principal  into  con- 
tractual relations  with  third  parties.  Of  course  the  same 
person  may  be  for  certain  acts  a  servant  and  for  others 
an  agent,  as  for  example  when  P's  plowman  purchases 
oats  for  the  farm  horses  on  P's  credit. 

§  3.  Responsibility  for  the  agent's  acts.  To  give  legal 
sanction  and  aid  to  the  extension  of  the  principal's  per- 
sonality through  the  acts  of  his  representatives  is  a  boon 
to  the  principal  for  which  the  law  exacts  a  return.  One 
who  receives  the  benefit  of  the  increased  capacity  to  act 


232  AGENCY 

given  him  through  agents  must  bear  the  burden  of  re- 
sponsibility within  reasonable  limits  for  the  acts  they  do. 
But  the  agent  may  do  things  he  is  not  authorized  by  his 
principal  to  do :  he  may  act  negligently,  or  may  disobey 
his  master  and  act  in  reckless  or  wilful  disregard  of  the 
rights  of  others  with  whom  his  occupation  brings  him  in 
contact.  Yet  within  limits  the  principal  is  responsible 
for  these  acts  also.  It  is  the  function  of  the  law  of  agency 
to  fix  these  limits  of  responsibility. 

§  4.  Personal  character  of  the  relation.  Again,  since 
the  principal's  selection  of  his  representative  depends  on 
his  belief  in  the  agent's  skill,  prudence,  diligence,  and  es- 
pecially his  fidelity,  and  since  the  agent's  willingness  to 
accept  the  appointment  also  depends  largely  on  the  per- 
sonal qualities  of  the  principal,  the  personal  element,  and 
particularly  the  fiduciary  element,  in  the  relation  is  an 
important  factor  in  shaping  the  legal  doctrines  of  agency. 
Out  of  these  two  fundamental  ideas— that  certain  acts  of 
a  representative  may,  for  purposes  of  fixing  legal  rights 
and  duties,  be  attributed  to  his  principal,  and  that  the  re- 
lation in  its  formation  and  its  conduct,  particularly  as 
regards  the  rights  and  duties  of  the  principal  and  the 
agent,  is  a  personal  one — the  distinguishing  features  of 
the  law  of  agency  may  be  said  to  be  developed. 

§  5.  Purposes  for  which  an  agency  may  be  created.  In 
general  any  lawful  business  may  be  transacted  through 
agents,  and  an  agency  may  be  created  for  the  purpose  of 
doing  any  act  which  the  principal  can  lawfully  do  him- 
self in  his  own  behalf.  One  cannot  do  through  an  agent 
what  one  is   forbidden  by  law   to   do   oneself.    Hence 


AGENCY  233 

agencies  cannot  be  created  to  do  acts  illegal  or  violative 
of  public  policy,  or  even  having  a  natural  and  direct  ten- 
dency to  promote  the  commission  of  such  acts.  The  in- 
quiry of  the  law  is  not  as  to  whether  in  a  particular  under- 
taking anything  improper  was  done  or  intended,  but 
whether  the  natural  and  probable  tendency  of  such  an 
undertaking  was  to  lead  to  acts  opposed  to  public  policy 
or  law.  So  for  example  contracts  of  agency  which  re- 
quire the  agent  to  commit  crimes,  to  endeavor  to  bribe  the 
servant  of  another,  to  deal  in  prohibited  articles,  to  seek 
to  suppress  a  criminal  suit,  or  to  further  and  increase 
litigation — such  acts  and  all  others  of  similar  character 
and  tendency  are  declared  void  (1). 

A  principal  not  only  cannot  appoint  an  agent  to  do  an 
aet  which  he  cannot  legally  do  himself,  but  also  he  cannot 
appoint  him  to  do  any  act  which  the  law  or  an  agreement 
of  the  parties  requires  the  principal  to  do  in  person.  Thus 
an  agent  cannot  exercise  the  principal 's  political  franchise 
for  him.  Nor  can  a  public  officer  whose  duties  require  the 
exercise  of  judgment  and  discretion  delegate  the  per- 
formance of  these  duties  to  an  agent  (2). 

§  6.  The  parties  involved  in  the  relation.  At  least 
two  parties  are  involved  in  the  relation  of  agency:  the 
principal  who  authorizes  the  agent  to  act  for  him,  and  the 
agent  who  acts.  If  the  authorization  contemplates  the 
bringing  of  the  principal  into  contractual  relations  with 
athere  a  third  party  may  be  involved.  Or  the  existing 
rights  of  third  parties  may  be  affected  apart  from  con- 


(1)  Mexican   Banking   Co.   v.   Lichtenstein,   10  Utah  338;  Lum  v. 
McEwen,  56  Minn.  278 ;  Sullivan  v.  Horgan,  17  R.  I.  109. 

(2)  Lyon  v.  Jerome,  26  Wend.  485. 


234  :a:gency 

tract  by  the  performance  of  the  agent's  duties.  The  law 
of  agency  then  concerns  itself  with  the  relations  arising 
out  of  agency  between  the  principal  and  the  agent,  the 
principal  and  the  third  party,  and  the  agent  and  the  third 
party. 


PART  1. 

THE  RELATION  AS  BETWEEN  PRINCIPAL  AND 

AGENT. 

CHAPTER  XL 
THE  FORMATION  OF  THE  RELATION. 

Section  1.    Competency  of  the  Parties. 

§  7.  Capacity  to  act  as  principal.  Generally  capacity 
to  act  as  a  principal  depends  on  capacity  to  do  directly 
the  act  which  the  appointment  contemplates  having  done 
through  an  agent.  One  cannot  do  through  an  agent  what 
one  is  legally  incapable  of  doing  in  person,  but  anyone 
who  can  make  a  valid  contract  can  authorize  an  agent  to 
make  it.  Conversely,  the  limits  on  one's  capacity  to  make 
binding  contracts  are  the  limits  of  one*s  capacity  to  ap> 
point  agents. 

§  8.  Same:  Infants  as  principals.  In  general  the  con- 
tracts of  infants,  except  for  necessaries,  are  voidable  at 
their  option;  in  other  words  an  infant  can  perform  or 
repudiate  his  obligation  at  his  election.  The  better  au- 
thority seems  to  be  that  the  same  rule  holds  true  as  to  his 
appointment  of  an  agent  (1).  Some  states,  however,  do 
not  permit  infants  to  appoint  agents,  and  the  majority  of 
American  jurisdictions  hold  that  for  some  or  for  all  pur- 


(1)     Hardy  v.  Waters,  38  Me.  450. 

235 


236  AGENCY 

poses  such  appointments  are  absolutely  void  (2).  This  Is 
most  widely  held  in  cases  of  appointment  for  execution  of 
a  formal  instrument  under  seal  called  a  power  of  attorney 
(3).  Contracts  for  necessaries  furnished  to  an  infant  are 
binding  whether  made  by  the  infant  or  by  an  agent. 
"Where  an  appointment  is  held  void,  contracts  made  under 
its  authority  cannot  subsequently  be  ratified  by  the  infant. 
Where  the  appointment  is  held  merely  voidable,  only  the 
infant  can  avoid  it;  it  is  enforceable  against  the  party 
with  whom  the  agent  made  it  (4). 

§  9.  Same:  Married  women.  At  common  law  a  mar- 
ried woman  could  not  make  any  contract,  but  in  most 
states  her  common  law  inability  has  been  in  whole  or  in 
part  removed.  Generally  so  far  as  she  has  been  given 
power  to  contract  or  do  other  acts  she  may  do  them 
through  agents,  unless  enabling  statutes  expressly  require 
personal  action  on  her  part.  This  sometime*  occurs  in 
the  case  of  the  execution  of  instruments  such  as  convey- 
ances (5). 

§  10.  Same:  Insane  persons.  The  weight  of  Ameri- 
can authority  is  that  contracts  of  insane  persons  are  void- 
able as  against  those  who  know  of  the  principal's  insanity, 
or  who  are  charged  with  notice  by  the  fact  that  the  prin- 
cipal has  been  declared  insane  by  a  court  of  law.  In  other 
cases  the  contract  is  binding  if  it  has  been  so  far  executed 
that  the  other  party  to  it  cannot  be  put  in  statu  quo. 
These  doctrines  apply  to  contracts  made  by  an  agent  ap- 


(2)  Cal.  Civil  Code,  Sec.  33. 

(3)  Lawrence  v.  McArter,  10  Ohio  37. 

(4)  Patterson  v.  Lippincott,  47  N.  J.  L.  45?. 

(5)  Sumner  v.  Conant.  10  Vt.  9. 


BETWEEN  PRINCIPAL  AND  AGENT  237 

pointed  by  an  insane  person.  But  some  courts  hold  that 
a  power  of  attorney  executed  by  an  insane  person  is  void, 
and  in  some  states  this  is  law  by  statutory  enactment  (6). 
§  11.  Same;  Corporations.  A  corporation  after  it  has 
been  organized  can  authorize  an  agent  to  do  any  act  it 
has  been  given  charter  power  itself  to  do.  Prior  to  its 
incorporation  there  can  be  no  agency  for  it,  and  acts  done 
by  persons  professing  to  act  in  the  name  of  a  corporation 
to  be  formed  are  not  binding  on  the  corporation  unless  it 
adopts  them  as  its  own  subsequent  to  the  incorpora- 
tion (7). 

§  12.  Same:  Partnerships.  A  partnership  as  such,  not 
being  a  legal  entity,  does  not  appoint  agents,  but  the  part- 
ners jointly  may  do  so,  and  generally  each  partner  has  im- 
plied authority  to  appoint  agents  to  carry  out  any  of  the 
purposes  for  which  the  firm  exists  (8). 

§  13.  Same:  Unincorporated  associationB.  Since  these 
organizations  are  not  legal  entities  they  cannot  as  organi- 
zations appoint  agents.  They  are  not  even  partnerships, 
so  that  individual  members  cannot  appoint  agents  to  bind 
the  society;  but  the  members,  acting  as  joint  principals, 
may  jointly  appoint  an  agent.  Such  appointments  are 
binding  only  on  those  members  who  expressly  or  im- 
pliedly assent  to  them  and  mere  membership  in  the  so- 
ciety is  not  sufficient  to  constitute  an  assent.  So  in  a  suit 
brought  by  the  publishers  of  a  college  annual  against  the 
senior  class  of  Tufts  College  it  was  proved  that  all  the 

(6)  Dexter  v.  HaU,  15  Wall.  9;  Cal.  Civil  Code.  sec.  38-40. 

(7)  Bell's  Gap  Ry.  Co.  v.  ChrisUe,  79  Pa.  54. 

(8)  Tillier  v.  Whitehead,  1  Dallas  269. 


238  AGENCY 

members  of  the  class  but  one  were  present  at  a  meeting, 
voted  to  elect  one  A  their  business  manager,  and  author- 
ized  him  to  make  arrangements  for  publishing  the  book. 
Those  voting,  or  assenting  by  presence  and  silence  to  the 
vote,  were  held  liable,  but  the  absent  member  was  held  not 
liable  for  the  acts  of  the  agent  (9) .  But  a  member  may  by 
previous  assent  be  bound  by  the  act  of  a  majority,  as  for 
example  where  he  signs  a  constitution  which  recognizes 
the  power  of  a  majority  to  bind  the  society  by  its  action. 

§  14.  Capacity  to  act  as  agent.  As  far  as  third  parties 
are  concerned,  anyone  may  act  as  agent  in  represent- 
ing a  principal  in  dealings  with  them,  except  in  cases  of 
special  sorts  of  agents,  such  as  attorneys  at  law,  where 
the  law  fixes  certain  requirements,  and  in  the  case  of  the 
usual  provisions  of  the  statute  of  frauds,  which  prevents 
the  agent  who  makes  the  memorandum  required  by  the 
statute  from  being  in  fact  the  other  principal  (10).  As 
between  the  agent  and  the  principal,  the  ordinary  rules  of 
contractual  capacity  apply.  If  the  agent  is  an  infant  he 
may  disaffirm  his  contract  of  employment,  but  if  he 
chooses  to  abide  by  it  the  principal  is  bound  on  his  side. 

Section  2.     Formation  of  the  Relation  by  Prior 
Agreement. 

§  15.  Essentials  of  the  relation.  The  ordinary  way  in 
which  the  relation  of  agency  is  formed  is  by  a  contract 
between  the  principal  and  the  agent,  by  which  the  agent 
agrees  to  act  as  the  principal's  representative,  and  the 


(9)  Willcox  V.  Arnold,  162  Mass.  577. 

(10)  Farebrother  v.  Simmons,  5  B.  &  Aid.  33. 


BETWEEN  PRINCIPAL  AND  AGENT  239 

principal  to  compensate  the  agent  for  his  services.  But 
the  agreement  may  fall  short  of  being  a  contract.  All 
that  is  essential  is  an  appointment  by  the  principal  and  an 
acting  under  it  by  the  agent.  In  the  case  of  Barr 
V.  Lapsley  (11)  a  certain  P  (12)  made  an  offer  to 
one  T  to  take  some  bagging  at  a  set  price  in 
liquidation  of  notes  vrhich  P  held  against  T,  and  named 
one  A  as  authorized  to  conclude  the  agreement.  T  noti- 
fied A  that  he  accepted  P's  offer  but  found  that  A  had  no 
word  directly  from  P  of  his  appointment,  and  that  he 
therefore  declined  to  act  for  P.  T,  however,  relied  on  his 
acceptance  as  completing  the  contract  with  P,  and  brought 
a  bill  in  equity  to  compel  specific  performance  on  P's  part 
of  the  agreement  to  take  the  bagging.  The  question  raised 
by  the  facts  was  whether  the  mere  nomination  of  A  as 
agent  by  P  created  the  relation  of  agency  unless  A  con- 
sented. The  court  held  that  it  did  not.  A  man  cannot 
be  made  agent  against  bis  will.  In  every  real  agency 
there  is  mutual  consent  of  the  principal  and  his  repre- 
sentative. 

§  16.  Implied  absent.  It  is  not  necessary  that  this 
consent  be  expressed  in  words.  It  may  be  implied  from 
the  circumstances  of  a  case.  Thus  when  a  wife,  whose  hus- 
band's work  frequently  took  him  away  from  home  for 
considerable  periods,  during  which  time  she  managed  the 
household,  borrowed  money  for  use  in  a  family  matter, 


(11)  Barr  v.  Lapsley,  1  Wheat.  151. 

(12)  For  purposes  of  convenience  the  initials  P,  A,  and  T  will  be 
used  instead  of  the  real  names  of  parties  in  the  cases  discussed.  P  will 
stand  for  the  name  of  the  party  who  is  a  principal,  A  for  the  aame  of 
his  agent,  and  T  for  the  name  of  the  third  party. 


240  AGENCY 

the  circumstances  were  held  to  show,  even  in  the  abs^ice 
of  any  express  appointment,  that  she  was  her  husband's 
agent  (13). 

§  17.  Gratuitous  agency.  It  is  not  necessary  that  the 
agent  receive  any  compensation  for  his  services.  In  the 
case  of  Hill  v.  Moray  (14),  A,  a  neighbor  of  P's,  merely 
out  of  friendliness  offered  to  assist  P  in  cutting  down 
brush  on  the  latter 's  woodlot.  P  permitted  him  to  help, 
and  A  during  the  work  carelessly  cut  trees  on  an  adjacent 
lot  belonging  to  T.  A  was  held  to  be  P  's  agent  so  as  to 
make  P  liable  for  the  trespass.  He  had  acted  for  P,  P  had 
permitted  him  to  do  so,  and  nothing  further  was  needed 
to  establish  an  agency.  As  between  P  and  A,  however,  a 
mere  gratuitous  promise  by  A  to  act  as  P's  agent  could 
not  be  enforced  by  P. 
Section  3.     Formation  of  the  Relation  by  Ratification. 

§  18.  Ratification:  Definition.  It  sometimes  happens 
that  an  agent  overstepping  the  authority  he  has  been 
given,  or  one  who  has  never  been  appointed  an  agent  as- 
suming to  act  in  that  capacity,  does  an  aet  on  a  principal 's 
behalf  and  in  his  name.  For  example,  A,  a  farm  hand, 
without  authority  to  purchase  land  for  P,  his  absent  em- 
ployer, learns  of  an  exceptional  opportunity  to  buy  a  field 
adjoining  P's  farm  at  a  bargain,  and  ventures  to  buy  it 
on  his  master's  credit,  T,  its  owner,  thinking  A  has  the 
requisite  authority.  A  then  writes  to  P  of  what  he  has 
done.  As  the  act  was  without  any  authority  on  A 's  part, 
P  is  not  obligated  by  it  and  may  disavow  it.    But  he  has 


(13)  Meader  v.  Page,  39  Vt.  30€. 

(14)  Hill  V.  Morey,  26  Vt.  178. 


BETWEEN  PRINCIPAL  AND  AGENT  241 

a  right  to  assent  to  it  and  treat  it  as  his  own.  If  he 
chooses  this  alternative  he  is  said  to  ratify  A 's  unauthor- 
ized act.  The  contract  made  by  A  is  binding  on  T,  and  P 
and  A  are  placed  in  the  same  relation  as  if  A  had  been 
previously  authorized  by  P  to  act  as  he  did.  In  one  sense 
A  is  by  ratification  made  an  agent  for  P  for  the  act  al- 
ready performed ;  but  strictly  speaking  ratification  is  not 
equivalent  to  appointment.  A  does  not  receive  any 
authority  for  future  transactions,  but  merely  as  to  a  con- 
summated act  he  is  treated  as  if  he  had  been  an  agent,  and 
the  results  of  ratification  for  all  the  parties  are  similar  to 
those  resulting  from  a  regularly  authorized  transaction 
carried  out  through  an  agent. 

§  19.    Ratification  is  equivalent  to  prior  authorization. 

If  A  in  Illinois,  without  having  authority  from  P,  makes 
a  promissory  note  in  P's  name,  payable  to  T  and  dated 
April  1,  with  legal  interest  from  date,  and  P  in  California 
ratifies  A's  act  on  May  1,  the  obligation  will  bind  P  from 
April  1,  and  the  rate  of  interest  will  be  the  Illinois  rate. 
In  other  words,  when  P  ratifies  his  quasi  agent's  act  it 
becomes  valid  from  the  date  of  A's  doing  of  it  rather  than 
from  the  time  of  P  's  ratification,  and  by  the  better  author- 
ity it  becomes  valid  as  to  the  place  of  A's  act  also  (15). 
A  valid  ratification  puts  A's  act  on  the  same  footing  as 
if  the  original  unauthorized  act  had  been  itself  valid  at 
the  time  of  his  doing  it.  So  the  rights  of  each  party  are 
what  they  would  have  been  if  P  had  given  A  authority  to 
do  the  act  in  question  prior  to  his  doing  it. 


(15)     Dord  V.  Bonnallee,  6  La.  Ann.  563. 


242  AGENCY 

§  20.  Ratification  is  irrevocable.  An  important  cor- 
ollary of  the  above  doctrine  is  that  a  valid  ratification 
once  made  cannot  be  withdrawn  by  the  principal.  Thus 
the  charterer  of  a  ship  who,  on  having  all  the  facts  of  the 
transaction  laid  before  him,  had  approved  a  previously 
unautliorized  act  of  his  London  agent  in  insuring  his  cargo 
with  a  foreign  company,  was  not  allowed  when  this  com- 
pany defaulted  payment  on  the  policy  to  retract  his  ap- 
proval in  order  to  hold  the  agent  liable  for  failure  to 
insure  (16). 

§  21.  Conditions  of  valid  ratification.  It  is  obvious 
that  the  right  of  ratifying  is  a  valuable  privilege.  The 
principal  may  examine  the  contract  made  by  his  professed 
agent,  and,  if  it  is  likely  to  prove  profitable,  ratify ;  and 
if  unprofitable,  reject  it.  Such  a  privilege  should  be  care- 
fully limited  in  its  scope,  and  permitted  only  under  condi- 
tions where  it  will  not  work  substantial  injustice.  Hence 
there  is  a  considerable  body  of  doctrine  as  to  the  condi- 
tions essential  to  a  valid  ratification. 

§  22.  Act  must  be  performed  for  existing  principal. 
The  principal  who  ratifies  must  have  been  a  person  in  ex- 
istence and  capable  of  being  ascertained  at  the  time  the 
agent  made  the  contract.  Frequently  the  promoters  of  a 
projected  corporation  do  acts  and  make  contracts  in  the 
name  of  the  corporation  prior  to  its  organization.  Such 
contracts  cannot  later  be  ratified  by  the  company.  In  the 
case  of  Kelner  v.  Baxter  (17),  A,  a  promoter,  made  a 
contract  on  behalf  of  the  P.  Hotel  Co.  which  he  was  seek- 


(16)  Smith  V.  Cologan,  2  T.  R.  188,  n  (a). 

(17)  Kelner  v.  Baxter,  L.  R.  2  C.  P.  174. 


BETWEEN  PRINCIPAL  AND  AGENT  243 

ing  to  incorporate.  The  P.  Co.  when  organized  attempted 
by  a  directors'  resolution  to  ratify  this  contract  and  thus 
relieve  A  of  personal  responsibility.  But  in  a  suit  by  the 
wine  merchant  T  against  A,  who  was  solvent  at  the  time 
of  the  suit  while  the  P.  Co.  had  become  insolvent,  it  was 
held  that  the  company's  attempted  ratification  was  in- 
valid since  the  company  was  not  in  existence  at  the  time 
of  the  original  contract. 

§  23.  Act  must  be  done  on  behalf  of  a  principal  dis- 
closed to  third  party.  The  agent  cannot  make  a  contract 
on  the  chance  that  someone  not  in  his  contemplation  at 
the  time  may  step  in  and  take  it  over.  Such  a  person's 
attempt  at  ratification  would  be  invalid.  Moreover  the 
agent  cannot  make  a  contract  in  his  own  name  and  obli- 
gate himself  to  a  third  party,  and  then,  without  the  con- 
sent of  the  third  party,  assign  it  to  someone  who  will  pro- 
fess to  ratify  it  as  principal.  He  cannot  show  that  he  had 
this  principal  in  mind  if  he  does  not  disclose  at  least  the 
fact  that  he  is  acting  as  an  agent.  As  was  said  in  such  a 
case,  it  is  immaterial  that  he  intended  the  contract  on  be- 
half of  this  undisclosed  principal  if  he  ''at  the  same  time 
keeps  his  intention  locked  up  in  his  own  breast."  "Un- 
less the  contract  made  by  the  unauthorized  agent  purports 
to  have  been  entered  into  on  behalf  of  another  .... 
then  that  contract  was  not  capable  of  being  ratified  by  a 
stranger  to  it There  must  be  some  special  re- 
lation between  the  ratifier  and  the  contract  other  than  and 

antecedent  to  his  claiming  the  contract There 

is  as  it  seems  to  me  no  room  for  ratification  (unless  all 
the  world  may  ratify)  until  the  credit  of  another  than 


244  AGENCY 

the  agent  has  been  pledged  to  the  third  party"  (18). 
§  24.  The  principal  must  be  competent  to  do  the  act. 
If  the  agent  enters  into  a  contract  on  behalf  of  a  principal 
who  could  not  make  it,  whether  because  of  incapacity  on 
his  part,  as  in  the  case  of  infants  where  their  contracts 
are  held  void,  or  because  the  contract  is  itself  illegal  and 
therefore  void,  the  principal  cannot  ratify  it.  An  in- 
stance of  the  latter  case  is  afforded  by  Milford  v.  The  Mil- 
ford  Water  Co.  A  borough  council,  a  majority  of  which 
was  composed  of  men  who  also  were  directors  of  a  water 
company,  made  a  contract  on  behalf  of  the  borough  with 
the  water  company,  in  violation  of  an  ordinance  prohibit- 
ing contracts  in  which  councillors  had  an  interest  that 
might  be  adverse  to  the  borough's.  At  a  later  time  when 
no  member  of  the  council  was  interested  in  the  water  the 
council  passed  and  paid  bills  of  the  company  against  the 
borough.  It  was  urged  that  this  was  a  ratification  of  the 
contract,  but  the  court  held  that  the  contract  was  incap- 
able of  ratification  on  account  of  its  illegality  (19).  A 
principal  may,  however,  adopt  the  wrongful  act  of  his 
quasi  agent  so  as  to  make  himself  civilly  responsible 
therefor.  Thus  if  the  agent,  in  the  course  of  the  trans- 
action which  the  principal  ratifies,  commits  a  tort,  the 
ratification  will  impose  liability  on  the  principal  for  the 
tort  (20).  But  the  law  will  not  allow  the  ratification  of 
criminal  acts  so  as  to  free  the  perpetrator  from  their  legal 
consequences  of  liability  to  prosecution.     Thus  in  the  case 


(18)  Keighley  v.  Durant,  (1901)  A.  C.  240. 

(19)  Milford  Borough  v.  Milford  Water  Co.,  124  Pa,  St.  610. 

(20)  See  §  27,  below. 


BETWEEN  PRINCIPAL  AND  AGENT  246 

of  a  forgery  of  P's  name  to  an  instrument  by  A,  an 
attempt  at  ratification  by  P  would  not  deprive  the  state 
of  its  right  to  punish  A ;  and  in  some  jurisdictions  it  will 
not  be  binding  on  P  if  he  chooses  later  to  repudiate  it,  un- 
less in  consequence  of  it  some  innocent  third  party  has 
taken  the  instrument  for  value,  relying  on  P's  acknowl- 
edgment of  the  signature.  Here  P  is  said  to  be  estopi)ed 
to  deny  his  liability,  but  where  there  is  no  such  estoppel 
against  P  the  better  opinion  is  that  P  is  not  bound  by  his 
acknowledgment  of  the  signature.  It  is  not  a  ratification, 
for  the  forger  obviously  did  not  profess  to  be  acting  as 
agent  (21).  Many  courts,  however,  hold  that  if  P,  with 
full  knowledge  of  the  circumstances  and  intent  to  be 
bound,  does  acknowledge  his  signature,  he  cannot  later 
withdraw  his  acknowledgment  (22). 

§25.  Intervening  rights  of  strangers  must  be  re- 
spected. Where,  prior  to  the  attempt  at  ratification,  par- 
ties unconnected  with  the  original  transaction  between 
the  quasi  agent  and  the  third  party  have  in  good  faith 
obtained  rights  in  the  subject  matter  of  the  transaction, 
the  principal  can  no  longer  ratify.  Thus  where  an 
unauthorized  agent  had  contracted  to  sell  to  T  a  ranch  be- 
longing to  P,  but  before  P  learned  of  this  he  himself  had 
transferred  his  title  to  another  party,  F,  P  could  not  then 
ratify  A's  contract  and  so  escape  from  his  own  transac- 
tion with  F  (23). 

§  26.    Intervening  rights  of  third  parties  must  be  re- 


(21)  Henry  v.  Heeb,  114  Ind.  275;  see  §  23,  above. 

(22)  Greenfield  Bank  v.  Crafts,  4  Allen  447. 

(23)  McDonald  v.  McCoy,  121  Cal.  55. 

Vol.  1—21 


246  AGENCY 

spected.  A  without  authority  gave  T,  a  tenant  of  P's,  six 
months'  notice  to  quit.  T  declined  to  act  on  the  notice 
without  further  assurance  of  A's  right  to  serve  him  with 
it.  P  when  told  of  A's  act  approved  it,  and  six  months 
after  A's  service  of  notice  brought  an  action  of  ejectment 
against  T.  It  was  held  that  the  ratification  was  invalid, 
since  T  had  a  right  to  be  assured  at  the  very  time  at  which 
he  was  called  on  to  act  and  prepare  to  leave  that  the  prin- 
cipal might  not  disavow  the  agent's  notice  afterwards, 
and  claim  T  still  as  his  tenant.  "The  tenant  was  en- 
titled to  such  notice  as  he  could  act  on  with  certainty 
at  the  time  it  was  given,  and  he  was  not  bound  to  submit 
himself  to  the  hazard  whether  the  third  co-executor 
[i.  e.  P]  chose  to  ratify  the  act  of  his  companions  or  not 
before  six  months  elapsed"  (24).  So  also  if  by  agreement 
between  the  third  party  and  the  quasi  agent,  with  whom 
the  third  party  thinks  he  has  contracted,  the  contract  is 
cancelled,  the  principal  cannot  subsequently  ratify  (25). 
And  in  America  generally,  the  third  party  with  whom  the 
quasi  agent  has  contracted  may  withdraw  if,  on  finding 
out  that  the  agent  had  no  authority,  he  communicates  his 
intention  to  withdraw  to  the  agent  or  the  principal  before 
the  principal  has  ratified  (26). 

§  27.  Transaction  cannot  be  ratified  in  part  only.  A 
principal  cannot  ratify  as  to  what  will  benefit  him,  and  re- 
pudiate as  to  the  rest.    He  must  take  the  burdens  of  his 


(24)  Right  V.  Cuthell.  5  East  491. 

(25)  Walter  v,  James,  L.  R.  6  Ex.  124. 

(26)  Dodge  V.  Hopkins,  14  Wis.  630;  Andrews  v.  JEtna  Co.,  92  N.  Y. 
696,  contra, 


BETWEEN  PRINCIPAL  AND  AGENT  247 

quasi  agent's  act  with  the  benefits.  In  the  case  of  Demp- 
sey  V.  Chambers  (27),  A  without  authorization  from  P 
sold  and  delivered  to  T  a  load  of  coal  from  P's  coal  yard. 
In  delivering  it  he  negligently  broke  T's  cellar  window. 
P  with  knowledge  of  these  facts  sent  T  a  bill  for  the  coal 
delivered.  By  thus  ratifying  A's  act  he  became  liable  for 
damages  for  the  broken  window.  The  court  said:  "It 
has  never  been  doubted  that  a  man's  subsequent  agree- 
ment to  a  trespass  done  in  his  name  and  for  his  benefit 
amounts  to  a  command,  so  far  as  to  make  him  answerable. 
....  The  ratification  was  not  directed  specifically  to 
[A's]  trespass,  and  that  act  was  not  for  the  defendant's 
benefit  if  taken  by  itself;  but  it  was  so  connected  with 
[A's]  employment  that  the  defendant  would  have  been 
liable  as  master  if  [A]  really  had  been  his  servant  when 
delivering  the  coal." 

§  28.  Ratification  must  be  with  full  knowledge  of  facts. 
Even  the  principal  himself  needs  some  protection  from 
too  sweeping  an  application  of  the  doctrine  of  ratification. 
The  assent  he  gives  to  the  quasi  agent's  act  must  be  a 
real  one,  with  knowledge  of  all  the  facts  pertinent  to  the 
transaction,  or  at  least  with  a  willingness  to  waive  further 
inquiry  (28).  If  through  ignorance  of  essential  details 
of  the  transaction,  due  either  to  a  mistake  on  the  princi- 
pal's part  or  to  fraud  on  the  part  of  others,  the  principal 
gives  an  assent  which  is  not  an  intelligent  one,  his  appar- 
ent ratification  does  not  bind  him.  Thus  when  P  ap- 
proved an  agent's  distraint  on  a  debtor,  in  the  reasonable 


(27)  154  Mass.  330. 

(28)  Lewis  v.  Read,  13  M.  &  W.  834. 


248  AGENCY 

belief  that  lie  had  taken  certain  property  from  a  certain 
specified  field,  he  was  held  not  to  have  bound  himself  by 
the  approval  when  it  appeared  that  the  property  had  been 
obtained  elsewhere  (28). 

§29.  Ratification  may  be  expressed  or  implied.  In 
general  any  manifestation,  whether  by  express  words  or 
conduct,  of  the  principal's  intention  to  approve  the 
agent's  act  is  sufficient  to  constitute  ratification.  But  if 
a  prior  appointment  to  do  the  act  the  agent  has  done 
would  have  had  to  be  in  writing  or  under  seal,  or  executed 
with  any  special  formality,  this  formality  should  be  fol- 
lowed in  ratifying  it.  Apart  fror^'^the  formal  and  express 
methods  of  ratification,  the  qued;ion  whether  or  not  the 
principal  has  ratified  is  a  question  of  evidence.  Even 
where  the  principal  had  no  express  intent  to  ratify,  if  his 
conduct  reasonably  interpreted  has  led  another  person 
to  believe  that  the  act  of  the  quasi  agent  was  done  by  his 
authority,  he  will  not  be  heard  to  deny  that  it  was  so  done. 
A  common  method  of  ratifying  an  act  is  by  accepting  the 
benefits  of  it.  If  P  receives  and  sells  goods  which  A  with- 
out authority  bought  for  him,  or  if  he  accepts  without 
objection  rents  accruing  under  a  lease  which  A  made  with- 
out authority,  his  conduct  would  amount  to  a  ratification 
(29).  Even  silence  under  some  circumstances  may  be 
a  proof  of  ratification.  In  Philadelphia  etc.  Ry.  Co.  v. 
Cowell  (30)  P  sued  the  T  By.  to  recover  certain  dividends. 
The  railway's  defense  was  that  these  had  been  applied  to 


(29)  McDowell  v.  McKenzie,  65  Ga.  630;  Burkhard  v.  Mitchell,  16 
Colo.  376. 

(30)  28  Pa.  329. 


BETWEEN  PRINCIPAL  ANT)  AGENT  249 

the  payment  of  an  authorized  additional  subscription  for 
stock.  The  subscription  had  been  made  by  A,  who  had 
immediately  inforaied  P  of  what  he  had  done.  P  made 
no  reply,  did  not  demand  the  dividends  for  seven  years, 
and  then  sued  for  them.  A  was  a  director  of  the  railway, 
and  had  often  been  consulted  by  P's  American  friends 
with  reference  to  P  's  interests  in  the  road.  The  court  in 
deciding  that  these  facts  should  be  admitted  in  evidence, 
said:  ''When  the  plaintiff  was  fully  informed  that  a  saga- 
cious financier,  to  whom  his  chosen  friends  and  corre- 
spondents had  referred  his  interests,  and  who  stood  in 
the  fiduciary  relation  of  a  director,  had  pledged  him  for 
a  new  subscription,  whicu  circumstances  seemed  to  justify 
and  demand,  I  say,  not  that  he  was  bound  by  it,  nor  even 
that  he  was  bound  to  repudiate  it,  but  that  his  delay  for 
nearly  seven  years  either  to  approve  or  repudiate,  was  a 
fact  fit  to  be  considered  by  a  jury  on  the  question  of  rati- 
fication. ' ' 

Section  4.     Fokmation  of  Quasi  Agencies  by  Operation 

OF  Law. 

§  30.  In  general.  In  cases  of  agency  by  prior  appoint- 
ment or  subsequent  ratification  the  basis  on  which  the 
agency  arises  is  the  will  of  the  parties  involved  in  the 
relation.  But  in  some  special  cases  similar  responsibili- 
ties to  those  arising  from  real  agencies  are  imposed  by  law 
on  a  principal  for  the  protection  of  third  parties.  This 
has  led  to  the  inclusion  of  two  classes  of  relationships — 
the  so-called  agency  by  estoppel  and  agency  by  necessity 


250  AGENCY 

:^with  real  agencies,  which  pro])erly  speaking  are  always 
representations  voluntarily  created. 

§  31.  Agency  by  estoppel.  If  the  conduct  or  words  of 
P  lead  a  third  party,  T,  reasonably  to  believe  tiiat  A  is 
P's  agent,  to  the  extent  that  T  changes  his  legal  i)Osition 
to  his  detriment  in  reliance  on  this  belief,  P  is  held  to  be 
a  j)rincipal  and  A  his  agent  for  the  transaction  entered 
into  between  A  and  T.  Thus  where  P,  P's  father,  and  T 
were  standing  by  a  field  belonging  to  T,  and  the  father 
proposed  to  T  that  he  let  P  have  the  field  on  a  lease,  to 
which  T  agreed,  P,  who  had  stood  silent  and  without  dis- 
claimer through  all  the  negotiations,  was  held  bound  by 
the  contract  as  if  his  father  had  been  his  agent,  though  in 
fact  he  had  not  authorized  it  {'M).  Strictly  spe;iking 
there  was  no  agency  here,  but  the  person  on  whose  con- 
duct a  third  party  had  relied  was  liable  just  as  if  there 
had  been.  Tlie  liability  is  imposed  on  him  without  his 
consent  by  the  law,  for  the  protection  of  the  third  party, 

§  32.  Agency  by  necessity.  Other  involuntary  liabili- 
ties similarly  imposed  constitute  a  group  usually  called 
agencies  by  necessity.  A  husband  is  bound  to  support  his 
wife;  if  therefore  he  wrongfully  neglects  or  refuses  to 
provide  her  with  necessaries,  she  may  still  pledge  his 
credit  for  the  means  of  subsistence,  even  though  he  ha« 
forbidden  her  to  do  so  or  has  forbidden  third  parties  to 
furnish  her.  See  the  article  on  Quasi-Contracts,  §  58, 
elsewhere  in  this  volume.  So  also  under  certain  circum- 
stances of  necessity  a  carrier  of  goods  or  a  master  of  a 


(31)     James  v.  Russell,  92  N.  C.  194. 


BETWEEN  PRINCIPAL  AND   AGENT  251 

ship  may  pledge  his  employer's  credit  in  the  carrying  on 
of  his  principal's  business  and  for  his  principal's  inter- 
est (32). 

Section  5.     Form  of  Appointment. 

§  33.  la  general  parol  appointment  sufficient.  An 
agent  may  be  aj>pointed  by  an  informal  agreement  either 
oral  or  written — technically,  an  appointment  by  i^arol — 
unless  there  is  some  statutory  provision  requiring  a  spe- 
cial form  of  appointment,  or  unless  the  authority  given 
is  to  do  an  act  which  must  be  done  under  seal,  as  for  ex- 
ample in  many  states  a  dood  for  the  conveyance  of  land. 

5j  34.  Exceptions:  Statutes.  Sealed  instruments.  In 
some  few  states  a  statute  of  frauds  provides  tliat  if  any 
contract  required  by  statute  to  be  in  writing  and  signed 
by  the  party  to  be  charged,  or  his  agent,  is  in  fact  signed 
by  an  agent,  the  appointment  of  this  agent  must  be  in  writ- 
ing. Statutes  in  some  states  provide  generally  that  an 
agent  to  make  certain  kinds  of  contracts — for  example 
for  the  purchase  or  sale  of  lands — must  be  appointed  in 
writing. 

At  common  law,  authority  under  seal  is  necessary  to 
enable  an  agent  to  make  a  contract  under  seal  binding  on 
his  principal.  The  commonest  examples  of  instruments 
under  seal  are  deeds  of  conveyance  and  bonds.  The  rule 
applies  at  common  law  even  to  the  filling  in  of  any  mate- 
rial blanks  in  such  instruments,  for  example  the  blank  left 
in  a  deed  for  the  name  of  the  transferee  of  land.     One 


(32)     McCready  v.  Thorn,  51  N.  Y.  454. 


262  AOENI 

important  exooption  to  tho  rulo  is  tlint  in  tho  rase  oT  the 
exc<'ution  of  sonN'd  instruinpnts  by  an  agrnt  of  a  (orpora- 
tion  IiIh  authority  ncod  not  Ih»  conferrod  untlor  seal.  In 
many  states  the  reijuirement  of  a  seal  has  l)een  al)olished 
by  statute,  and  of  oourso  here  tlie  rule  has  no  relevanco. 
Where,  however,  a  sral  is  still  re«|uire<l,  although  various 
relaxations  of  the  rigidity  of  the  common  law  nile  have 
been  introducfNl,  safety  lies  in  the  ap{>ointment  under  seal 
of  an  agent  to  execute  an  instrument  under  seal. 


CHAPTER  III. 

TERMINATION    OF    THE    RELATION. 

§  35.  In  general.  Agencies  may  bi'  trnninatod  by  the 
consent  of  both  parties,  by  the  sole  will  of  either  party, 
or  by  the  operation  of  law. 

§  36.  Termination  by  consent  of  principal  and  agent. 
When  a  man  appoints  an  agent,  the  api)ointment  is  ordi- 
narily for  some  fixed  |>erioil  or  definite  purpose,  and  when 
the  time  set  has  expired,  or  some  agreed  date  has  been 
reached,  or  when  the  purpose  of  the  agency  has  been  ac- 
complished, the  agency  comes  to  an  end.  P  hires  his 
clerk  for  a  year;  he  takes  on  extra  help  in  his  store  until 
stock-taking  is  over ;  he  secures  the  services  of  an  attoniey 
to  sue  a  debtor.  When  the  year  is  over,  or  when  the  stock- 
taking has  Ijeen  completed,  or  when  the  attorney  has  car- 
ried a  suit  to  judgment,  tlie  agenej'  by  the  terms  of  the 
original  agreement  comes  to  an  end.  Often,  liowever,  the 
parties  fail  to  fix  definitely  the  time  at  which  the  employ- 
ment is  to  terminate.  In  such  cases  resort  may  be  had  to 
the  surrounding  circumstances,  or  an  interpretation  of  the 
language  of  the  agreement,  to  determine  the  intention  of 
the  parties.  Thus  where  A  was  employed  as  attorney  of 
the  P  Co.  under  an  agreement  that  he  was  to  act  "from  the 
first  of  June  next  at  £100  per  annum,"  this  was  held  to  be 
a  contract  employing  A  for  at  least  one  year  (1).     The 


(1)     EtomoDB  V.  Elderton,  13  C.  B.  4»5. 

253 


254  AGKNCY 

iutention  of  the  parties  governs.  Even  wlion  there  is  no 
previous  agreement  as  to  tlie  period  during  which  the 
relation  is  to  continue,  or  wlien  there  is  some  agreement 
from  which  the  parties  desire  to  be  released,  if  lK)th  are 
desirous  of  putting  an  end  to  the  relation,  a  subse<iuont 
agreement,  if  it  has  the  elements  of  a  vali<l  contract,  may 
at  any  time  tcriniiiat<'  the  agency. 

§  37.  Revocation  by  the  principal.  The  authority  of 
the  agent  is  conlVnc*!  !)y  the  principal,  to  he  exercised  at 
his  direction  and  for  his  ends.  If  therefore  the  principal 
wishes  to  discontinue  the  relation  for  any  reason,  he  is 
allowetl  to  «lo  so,  unless  there  are  s|)ecial  circumstances 
giving  the  agent  power  to  exercise  the  authority  conferred 
uj)on  him  vxvn  against  the  principal's  wishes.  The  prin- 
cij)al  may  wish  to  abandon  the  enterprise  in  which  the 
agent  represents  ":im,  because  i^,  is  unprotitable  or  trouble- 
some, or  for  any  or  no  reason.  In  the  case  of  Brown  v. 
Pforr  (2)  A,  a  real  estate  agent,  sued  on  a  contract  made 
with  him  by  I^,  by  which  P  agreed  to  i)ay  A  $750  if  A 
would  tiiKJ  within  one  montli  a  buyer  for  P's  land  at 
$75,000.  Within  the  month  A  had  found  a  j)urchaser,  but 
before  this  P  had  notified  him  that  the  agency  was  re- 
voked. It  was  held  that  P  was  not  liable  to  A.  As  the 
court  remarked:  "The  rule  that  in  this  class  the  principal 
may  revoke  at  any  time  before  complete  performance  by 
the  broker  unless  he  has  expressly  otherwise  agreed  may 
be  a  harsh  rule,  but,  if  it  is,  it  would  seem  a  very  easy 
matter  for  the  broker  to  protect  himself  against  it. ' ' 


(2)     Brown  v.  Pforr.  38  Cal.  550. 


BETWEEN  PRINCIPAL  AND  AGENT  255 

§  38.  Rights  of  the  agent  on  revocation.  The  opinion 
above  suggests  a  hmitation  on  the  power  of  the  principal 
to  revoke.  If  the  agent  has  a  contract  of  emplojTnent 
fixing  a  definite  time  for  the  termination  of  the  agency, 
this  amounts  to  an  agreement  on  the  principal's  part  not 
to  exercise  his  jwwer  to  revoke  the  agent's  authority.  He 
may  still  do  so,  but  if  he  does  so  in  unexcused  breach  of 
the  contract,  he  renders  himself  liable  to  the  agent  in  dam- 
ages. The  authority  may  be  withdrawn,  but  the  contract 
cannot  be  broken  without  this  liability.  Moreover  even 
when  there  is  no  violation  of  contract  the  agent  is  entitled 
upon  revocation  to  reimbursement  and  compensation  for 
work  done  while  the  relation  existed.  *'If  he  expended 
money,  time,  or  labor,  or  all  upon  the  business  entrusted 
to  him,  the  power  of  attorney  itself  was  a  request  to  do 
so,  and  on  a  revocation  would  leave  the  principal  liable 
to  him  on  his  implied  assumpsit"  (3). 

§  39.  When  revocation  is  justified.  p:ven  if  in  the  con- 
tract of  agency  the  principal  has  bound  himself  not  to  re- 
voke, or  has  agreed  to  employ  the  agent  for  a  fixed  period, 
he  still  may  without  warning  and  without  liability  dismiss 
tiie  agent  if  the  agent  does  not  keep  his  part  of  the  con- 
tract. On  the  agent's  side  of  the  contract  it  is  an  implied 
term  that  he  possesses  and  will  exercise  the  required  skill 
and  care  necessary  to  a  proper  discharge  of  his  duties, 
and  that  he  will  be  loyal  to  his  employer's  interests.  If 
then  for  any  reason  he  becomes  incapable,  or  if  he  miscon- 
ducts himself  in  any  way  likely  to  prove  injurious  to  the 

(3)     Blackstone  v.  Buttermore,  53  Pa.  266. 


256  AOFA'CT 

interests  of  his  principal,  the  principal  may  ilischarpre  liim. 
Thus  vviiere  A,  employed  hy  the  year  hy  I*  to  manage  P's 
woodyanl,  wont  into  the  wood  business  in  the  same  town 
within  the  year  and  P  dismissed  him  on  this  account,  1* 
was  upheld  by  the  court  when  A  sued  him  for  a  year's 
wages  (4). 

ij  40.  What  constitutes  a  revocation.  A  principal  may 
revoke  i»is  agent's  appoiiilnirnt  in  express  words,  or  a 
revocation  may  be  implied.  In  the  absence  of  statute  no 
particular  formality  need  be  observed  in  revoking  even  an 
authority  under  seal.  The  acts  which  will  be  held  to  con- 
stitute a  revocation  are  various,  and  a  few  examples  must 
serve.  It'  the  agent  is  given  property  to  sell,  hut  prior 
to  his  doing  it  the  ]irincipal  himself  dis|>oses  of  the 
property,  the  agent's  authority"  is  thereby  revoked  (5). 
So  also  if  the  principal  apix)ints  a  second  agent  to  do  the 
same  act  as  he  had  formerly  given  a  first  agent  exclusive 
authority  to  do,  the  second  appointment  revokes  the  first 
(6).  But  if  the  first  be  not  exclusive,  and  the  second  not 
inconsistent  with  it,  a  second  agent  does  not  revoke  the 
first  appointment.  For  example,  P  may  list  his  house  for 
sale  with  several  real  estate  brokers,  and  all  will  be  agents 
alike.  The  sale  by  one  agent,  however,  will  revoke  the 
authority  of  all  the  others,  as  the  principal  has  thereby 
disposed  of  the  subject  matter  of  the  agency  (7). 

§  41.    Necessity  of  notice  of  revocation.    Notice  of  re- 


(4)  Dierlnger  v.  Meyer,  42  Wis.  311. 

(5)  Gilbert  v.  Holmes,  64  III.  548. 

(6)  Johnson  v.  Youngs.  82  Wis.  107. 

(7)  Ahem  v.  Baker,  34  Minn.  98. 


BETWEEN   PRINCIPAL  AND  AGENT  257 

vocation  is  in  general  necessary  to  make  it  binding  on  the 
agent  and  the  third  party.  In  Robertson  v.  Cloud  (8)  P 
had  appointed  A  an  agent  to  sell  a  plantation,  and  had 
subsequently  sent  A  a  letter  revoking  the  agency.  But 
tiie  letter,  though  it  was  mailed  before  A  found  a  buyer, 
(lid  not  reach  him  until  after  the  contract  was  made.  It 
was  held  that  the  agency  was  good  until  A  got  his  notice, 
and  so  the  agent  was  allowed  to  recover  his  commission 
on  the  transaction. 

As  to  parties  who  have  dealt  with  the  agent  while  he 
still  had  authority,  the  same  rule  obtains.  An  insurance 
company  had  appointed  one  A  its  general  agent,  and  T 
paid  him  premiums  on  a  policy  during  the  time  of  his 
agency  and  after  it  was  revoked  by  the  company  because 
of  A's  having  accepted  the  agency  for  another  company. 
No  notice  was  sent  by  the  company  to  T  that  A  was  no 
longer  its  agent.  It  was  held  that  the  company  was  bound 
by  A's  receipt  for  T's  premium  payment ;  for,  as  the  court 
said:  "No  company  can  be  allowed  to  hold  out  another 
as  its  agent  and  then  disavow  responsibility  for  his  acts. 
After  it  has  appointed  an  agent  in  a  particular  business, 
parties  dealing  with  him  in  that  business  have  a  right  to 
rely  on  the  continuance  of  his  authority  until  in  some  way 
informed  of  its  revocation"  (9).  Thus  notice  should  be 
brought  home  to  all  those  to  whom  the  principal  has  held 
out  the  agent  as  having  authority.  They  are  entitled  to 
such  notice  as  would  serve  to  put  a  reasonably  prudent 
man  on  inquiry.    Actual  notice  should  be  given  to  all  who 


(8)  Robertson  v.  Cloud,  47  Miss.  208. 

(9)  Insurance  Co.  v.  McCain,  96  U.  S.  84. 


258  AGENCY 

have  extended  credit  to  tlie  agent  in  reliance  on  his  author- 
ity, and  general  public  notice  to  others  (10). 

§  42.     Renunciation  by  the  agent.    .lust  as  a  principal 
has  power  to  dismiss  his  agent  at  will,  so  also  an  agent 
can  leave  his  employment  at  will.     Practically  the  same 
rules  govern  renunciation  by  an  agent  as  govern  revoca- 
tion by  a  princij)al.     If  an  agent  iiuits  !iis  task  when  he 
ha.«^  agreed  to  work  lor  a  definite  time  he  makes  himself 
liable  for  a  breach  of  contract  unless  the  principal  has 
broken  his  side  of  the  agreement.     If  he  thus  renounces 
his  employment  l)i*fore  his  contract   exi>ires,  he  cannot 
in  most  cases  recover  any  compensation  for  the  work  he 
has  actually  done;  but  some  jurisdictions  allow  him  the 
reasonable  value  of  his  ser\'ices  to  his  |)rincipal,  less  the 
loss  the  principal  has  suffered  by  his  breach  of  the  con- 
tract to  remain.    A  renunciation  need  not  be  in  express 
words;  for  example  a  mere  abandonment  of  the  work  by 
the  agent  may  be  taken  by  his  principal  as  an  indication 
of  an  intention  to  renounce  the  agency.     Notice  of  the 
renunciation  must  reach  the  principal  to  make  it  effective 
between  him  and  his  agent,  and  the  principal  must  give 
notice  to  third  parties  in  order  to  protect  himself  from 
further  contracts  being  made  by  the  agent.    For  example, 
the  P  Insurance  Co.  appointed  A  their  Massachusetts 
general  agent,  and  filed  as  re(]uired  by  law  his  power  of 
attoiTiey  with  the  secretary-  of  state  in  December,  1850. 
In  February,  1851,  A  sent  in  his  resignation,  and  it  was 
accepted  to  take  effect  April  1 ;  but  no  notice  was  sent  the 


(10)     Claflin  v.  Lenheim.  66  N.  Y.  301. 


BETWEEN   PRINCIPAL   AND   AGENT  259 

secretary  of  state.  On  April  1^  a  Massachusetts  creditor 
of  the  company  served  process  on  A  as  agent  of  the  com- 
pany, and  he  accepted  process,  avowing  his  agency. 
Judgment  was  duly  recovered  against  the  company,  the 
court  holding  that  as  to  third  ])arties  renunciation  was 
inoj)erative  until  notice  was  given  them  (11). 

^  43.  Termination  by  operation  of  law:  Change  in  the 
subject  matter.  Tiu*  law  discharges  the  contract  of 
agency  as  it  does  other  contracts,  on  grounds  of  public 
policy  or  necessity,  even  though  it  may  be  that  both  prin- 
cipal and  agent  wish  to  continue  the  relation.  For  ex- 
ample, if  the  law  makes  the  act  for  which  the  agency  was 
created  illegal,  though  it  was  legal  when  the  agency  was 
created  the  relation  of  agency  will  be  thereby  terminated. 
So  if  A  had  been  appointed  bartender  in  a  city  which 
enacted  a  prohibitory  law,  A*8  employment  would  cease 
by  operation  of  law.  So  also  if  without  voluntary  act  of 
either  princi])al  or  agent  the  subject  matter,  the  continued 
existence  of  which  was  contemplated  when  the  agency  was 
created,  is  destroyed  or  permanently  altered,  the  agency 
will  be  terminated.  Thus  where  A  agreed  to  manufac- 
ture cheese  from  milk  furnished  by  P  at  A's  factory,  when 
fire  destroyed  the  factory,  A  was  thereby  released  from 
his  contract  of  agency.  The  court  interpreted  the  con- 
tract as  contemplating  the  manufacture  from  milk  fur- 
nished by  P  at  this  particular  factory  only  (12). 

§  44.    Same:    Death  of  a  party  or  dissolution  of  a  cor- 


(11)  Capen  v.  Insurance  Co..  1  Dutcher  (N.  J.)  67. 

(12)  Stewart  v.  Stone.  127  N.  Y.  500.  and  see  the  article  on  Con- 
tracts, S  188,  earlier  in  this  volume. 


260  AGENCY 

poration  or  partnership.  The  death  of  either  party  ter- 
minates a  mere  agency.  After  the  death  of  the  principal, 
acts  done  hy  the  n^ent  are  not  binding?  on  the  principal's 
heirs  or  representatives.  Nor  can  thes4?  parties  compel 
the  agent  to  continue  his  employment.  So  where  A  cxtn- 
tracted  to  work  for  P  for  a  y(»ar  as  a  farm  hand,  and  P 
died  at  the  end  of  four  months,  but  A  went  on  working 
and  sued  P's  estate  for  sabswiuently  rendered  ser\'ice«,  it 
was  held  that  the  estate  was  not  liable.  The  court  said: 
'"Hie  master's  habits,  character,  and  temper  enter  into 
tiic  consideration  of  the  servant  when  he  binds  himself  to 
the  service,  just  as  his  own  personal  characteristica  ma- 
terially affe<'t  the  choice  of  the  master.  The  service,  the 
choice,  the  contract,  are  personal  u|)on  both  sides"  (13). 
The  same  rule  applies  in  the  case  of  the  death  of  the 
agent.  Money  due  him,  for  example,  on  goods  sold  for  his 
I)rincipal  should  therefore  be  paid  to  the  j)rincipal,  and 
not  to  the  agent's  administrators  (14).  The  dissolution  of 
a  corporation  or  partnership  terminates  an  agency  in 
which  the  association  was  either  principal  or  agent  (15), 
but  does  not  necessarily  free  it  from  liability  on  the 
agency  contract.  The  harshness  of  the  common  law  rule 
that  the  death  of  the  principal  immediately  and  without 
notice  puts  an  end  to  his  agent's  authority  has  led  to  the 
enactment  of  statutes  in  several  states  making  valid  the 
acts  of  agents  done  after  a  i)rincipars  death,  if  done  in 
bona  fide  ignorance  of  that  fact. 


(13)  Lacy  t.  Getman.  119  N.  Y.  109. 

(14)  Merrick's  Estate.  8  Watts  k  S.  402. 

(15)  People  V.  Globe  Ins.  Co.,  91  N.  Y.  174. 


BETWEEN  PRINCIPAL  AND   AGENT  261 

§  45.  Same :  Various  changes  of  condition  of  one  of 
the  parties.  If  after  the  relation  is  formed  either  princi- 
pal or  agent  becomes  insane,  this  occurrence  terminates 
the  agency  unless  the  party  who  deals  with  the  agent  was 
ignorant  of  the  insanity  and  acted  in  good  faith.  In  such 
a  ca.se  the  contract  with  the  third  party  is  binding  on  the 
principal  although  as  to  the  agent  the  agency  was  at  an 
end  (IG).  But  a  judicial  declaration  of  the  party's  in- 
sanity will  be  notice  to  all  the  world  of  that  fact.  If 
either  party  becomes  bankrupt,  since  the  bankruptcy  di- 
vests him  of  all  control  over  his  property,  the  relation 
of  agency  will  thereby  be  terminated  as  to  all  rights  af- 
fected by  the  bankruptcy.  The  illness  of  the  agent,  if  it 
incapacitates  him  from  performing  his  duties,  puts  an 
end  to  the  agency;  but  the  illness  of  the  principal  will 
not  usually  have  such  an  effect.  If  the  marriage  of  the 
principal  affect  his  rights  in  the  subject  matter  of  the 
agency,  such  agency  will  be  terminated.  For  example, 
where  marriage  gave  P's  wife  an  interest  in  land  which 
P  owned,  and  which  he  had  given  A  a  power  of  attorney 
to  sell,  the  marriage  was  held  to  nullify  A's  power  of 
attorney  (17). 

^  46.  Irrevocable  agencies:  Powers  granted  for  the 
protection  of  the  agent.  Mere  agencies,  as  we  have  seen, 
are  revocable  by  the  will  of  the  principal  or  by  certain 
changes  in  his  condition.  But  where  the  agency  is  in 
legal  phrase  ** coupled  with  an  interest"  in  the  subject 
matter  of  the  agency,  then  it  cannot  be  thus  terminated. 


(16)  Drew  v.  Nunn.  4  Q.  B.  D.  661. 

(17)  Henderson  v.  Ford,  46  Tex.  627. 

Vol.  I— 2  2 


262  AGENCY 

If  an  agent  who  has  such  an  interest  himself  were  to  be 
dismissed  he  would  lose  more  than  merely  his  employ- 
ment and  his  commissions.  He  would  lose  either  a  secur- 
ity he  has  been  given  for  his  protection  as  creditor  of  the 
principal,  or  a  property  right  in  the  subject  matter  of 
the  agency  itself.  Wherever  a  principal  has  conferred 
on  an  agent  his  authority  as  a  security  for  some  debt  owed 
by  the  principal  to  the  agent,  the  authority  is  irrevocable, 
at  least  by  the  i)rincipal  himself.  Thus  in  the  case  of  The 
Pacific  Coast  Co.  v.  Anderson  Co.  (18),  V  chartered  a 
vessel  from  A  at  a  monthly  hire,  agreeing  to  pay  all  ex- 
penses of  navigation  and  to  give  a  bond  t«)  secure  the 
fulfilment  of  the  contract.  He  then  subchartered  the  ves- 
sel for  the  carriage  of  coal  at  a  stipulated  freight.  In  lieu 
of  the  bond  he  liad  contracted  to  give,  he  gave  A  a  jK)wer 
of  attoiTiey  to  collect  all  such  freights  as  should  become 
due  to  P  under  the  subcharter,  and  to  apply  them  to  the 
vessel's  hire.  It  was  held  that  this  power  of  attorney, 
having  been  given  for  a  valuable  consideration  and  as  a 
security  for  the  payment  of  money,  was  irrevocable  by  P. 

§  47.  Same:  Powers  coupled  with  an  estate.  Some 
courts  hold  that  such  a  power  is  not  revoked  even  by  the 
death  of  the  principal,  but  in  America  generally  a  dis- 
tinction is  made  between  power  of  attorney  irrevocable 
during  the  life  of  the  principal  (inter  vivos),  of  which 
the  case  just  cited  is  an  example,  and  powers  irrevocable 
even  by  death.  The  latter  must  be  powers  coupled  with 
an  interest  in  a  stricter  sense  than  is  a  power  given  to 


(IS)     Pacific  Coast  Co.  v.  Anderson  Co..  107  Fed.  Rep.  973. 


BETWEEN  PRTXCIPAL  AND  AGENT  203 

secure  a  debt  by  control  over  the  proceeds  of  the  exercise 
of  the  power.    By  power  coupled  with  an  interest  these 
courts  mean  a  power  coupled  with  a  property  interest  in 
the  subject  matter  of  the  agency  itself— an  actual  estate 
in  the  thing  the  agent  has  been  authorized  to  deal  with. 
Such  a  power  is  irrevocable  even  by  the  death  of  the 
principal  or  agent,  or  any  change  of  condition,  such  as 
insanity,  bankruptcy,  or  marriage.    In  the  case  of  Norton 
V.  Whitehead  (19),  P,  a  contractor,  had  borrowed  from  A, 
his  foreman,  various  sums  to  enable  him  to  carry  out  a 
contract.     Later  he  executed  to  A  an  assignment  of  all 
moneys  due  or  to  become  due  .  .  .  *'for  any  work  I  may 
perform,  ...  the  assignment  to  remain  good  until  all 
notes  due  or  which  are  to  become  due  .  .  .  from  me  are 
paid."    Still  later  P  gave  A  a  power  of  attorney  author- 
izing him  to  collect  all  moneys  due  or  to  become  due  to 
P  by  reason  of  his  j^erformance  of  the  contract  he  was 
engaged  on.    P  died,  and  the  work  was  finished  by  his 
administrator,  who  collected  the  moneys  due,  claiming 
that  A's  power  of  attorney  was  nullified  by  P's  death. 
In  a  suit  by  A  it  was  held  that  his  power  was  one  coupled 
with  an  interest  in  the  subject  matter  of  the  agency.    This 
subject  matter,  the  court  said,  was  "all  moneys  that  were 
to  become  due"  to  P  by  reason  of  his  performance  of  the 
contract.    Such  a  power,  it  was  held,  was  not  revoked  even 
by  death,  and  so  A  was  entitled  as  against  the  administra- 
tor to  the  payments  under  the  contract. 

(19)     Norton  v.  Whitehead.  84  Cal.  263. 


CHAPTEU  IV. 

OBLIGATIONS  OF  PRINCIPAL  TO  AGENT. 
.SkcTIuN      1.       OBLIGATION     TO     liKCoMI'KNSE. 

55  48.     Compensation.     Ordinarily   an  agent's   pay   Ls 
fixed   hy   lii,>  contra*  t   of  agency,  but  if  none  has   been 
agreed  on  and  there  are  no  circuinstiinces  negating  the 
obligation  of  the  principal  to  pay  it,  the  principal  must 
pay  the  agent   what  iiis  sen'icea  are  reas<innbly  worth. 
1 1  the  a.i^em-y  lias  been  created  by  ratification  the  same 
obligation  is  iin|K)sed  on  the  prineipal.     Failure  to  pay 
the  agent  his  wages  or  salary  makes  the  principal  liable 
for  breach  of  contract.     If  a  i)rincipal  wrongfully  dis- 
eharges  an  agent,  the  agent  may  recover  his  entire  stipu- 
lated commission  less  whatever  he  would  have  been  able 
to  earn  at  a  similar  occuj)ation  during  the  unexpired  term 
of  his  contract  with  the  principal,  if  by  reasonable  dili- 
gence he  could  have  secured  such  similar  employment. 
If  the  agency  is  revoked  by  operation  of  law,  or  by  the 
exercise  of  the  principal's  power  to  revoke  an  appoint- 
ment not  made  for  a  definite  period— an  agency  at  will,  as 
it  is  sometimes  called— the  agent  is  entitled  to  compen- 
sation measured  by  the  reasonable  value  of  the  benefits 
conferred  on  the  principal.     If  the  agent  renounces  his 
employment  before  its  contract  term  he  can,  in   most 
states,  recover  nothing,  but  some  states  allow  recovery 

264 


BETWEEN  PRINCIPAL  AND  AGENT  265 

on  quasi-contractual  grounds.  If  his  employment  was 
one  at  will  the  agent  may  recover  for  services  already 
rendered.  An  agent  who  has  violated  his  duties  to  his 
principal  (see  Chapter  V  below)  cannot  recover  compen- 
sation (1). 

§  49.  Reimbursement.  For  all  expenses  which  the 
agent  has  necessarily  incurred  in  the  di.scliarge  of  his 
duties  as  agent,  on  behalf  of  the  i)rincipal,  the  agent  is 
entitled  to  reimbursement  from  the  principal.  Thus  a 
commission  merchant  was  allowed  to  recover  the  expenses 
of  an  insurance  adjustment  he  had  procured,  in  good 
faith,  to  protect  his  employer's  interests,  after  fire  had 
damaged  the  hitter's  goods;  and  this  was  allowed  even 
though  it  was  shown  that  other  persons  than  the  adjuster 
he  procured  would  have  done  the  work  more  cheaply 
(2).  The  agent's  outlay,  nmst  not,  however,  be  for  an 
illegal  end.  For  instance,  in  jurisdictions  where  gambling 
contracts  are  declared  illegal  by  statute,  an  agent  who 
knowingly  pays  out  money  for  his  principal  on  a  wager 
is  not  entitled  to  reimbursement  (3).  Nor  can  the  agent 
recover  for  unnecessary  expenses  or  outlays  caused  by 
his  own  fault  or  neglect  Thus  where  an  agent  appointed 
to  buy  some  property  and  make  the  necessary  transfers 
of  title  accepted  a  transfer  made  out  to  one  "Arthur  K." 
instead  of  "Alexander  S.  K.,**  as  the  name  should  have 
read,  and  then  paid  solicitors  to  secure  a  correction  of 


(1)  The  doctrines  of  compensation  are  purely  matters  of  contract 
or  quasi  contract  For  fuller  discussion  the  reader  is  referred  to  the 
articles  on  these  subjects  earlier  in  this  volume. 

(2)  "Wertheimer  v.  Talcott,  103  N.  Y.  Supp.  692. 

(3)  Tatam  v.  Reeve,   (1893)   1  Q.  B.  44. 


266  AIJKNCY 

the  mistake  and  a  i^ood  conveyance,  it  was  bcUl  that  he 
could  not  recover  from  the  principal  the  exi^uses  conso- 
(|uent  iiiK)n  his  blunder  (4). 

§  50.  Indemnity.  If  in  the  dne  execution  of  his  aj^ncy 
the  agent  sulTiTs  loss  or  damage  Ije  is  entitled  to  in- 
demnity from  his  principal,  except  where  he  has  with 
knowledge  or  the  duty  of  knowledge  engage<l  in  an  illegid 
task.  In  other  words,  if  an  agent  is  an  innocent  i^irty  to 
a  wrong  dircctnl  hy  his  principal,  he  may  rw^over  from 
the  principal  for  any  damages  he  is  com|)elled  to  imy  to 
tile  injured  party.  Iti  Adamson  \.  .larvis  (5),  A.  an 
auctioneer,  having  receiveil  orders  from  V  to  sell  cattle 
which  P  state<l  to  Ix'  his  own,  executc«l  the  order  in  good 
faith.  He  was  then  sued  by  T,  who  was  the  rightful 
owner  of  the  cattle,  for  the  conversion  of  the  animals,  an<l 
compelled  to  pay  damages  and  expend  money  in  lawyers' 
fees  and  other  expenses  of  the  suit.  All  of  these  outlays 
he  was  allowed  to  recover  from  P.  Of  course  if  A  had 
known  at  the  time  of  the  sale  that  the  cattle  did  not  be- 
long to  P.  he  could  have  recovered  nothing. 

J*^p:cti()x  2.     Obligation  to  Protect. 

§51.  Protection  from  injury:  In  general.  The  master 
(6)  is  bound  to  u>e  reasonable  care  to  prevent  his  servant 
from  being  injured  in  tlie  course  of  his  employment.    If 


(4)  Bailey  v.  Burgess.  48  N.  J.  Eq.  411. 

(5)  Adamson  v.  Jarvls.  4  Bing.  66. 

(6)  As  the  duty  of  protection  arises  most  frequently  In  that  form 
of  agency  relation  known  as  master  and  servant,  the  words  master  and 
servant  will  be  used  throughout  this  section,  the  parties  in  the  illus- 
trative examples  being  indicated  respectively  by  the  letters  M  and  S. 


BETWEEN   PKiMll'AL  AND   AGENT  267 

he  does  not  exercise  this  care,  and  a  servant  is  injured  on 
account  of  his  failure  to  do  so,  he  is  liable  to  the  servant 
in  damages,  unless  the  injury  has  arisen  from  a  risk 
placed  by  law  upon  the  servant  or  voluntarily  assumed  by 
him;  or  unless  the  ser\'ant  by  his  own  acts  or  negligence 
directly  contributed  to  the  injury.  The  master  in  other 
words,  is  not  liable  for  all  injuries  occurring  in  the  course 
of  the  servant's  employment,  but  only  for  those  of  which 
his  own  neglect  of  duty  is  the  proximate  cause.  In  a  re- 
cent case  the  facts  were  these:  S  while  working  in  M'a 
mine  was  overcome  by  gas.  and  then  while  being  taken  up 
from  the  shaft  unconscious  had  his  leg  broken,  because 
his  foot  was  allowed  to  project  over  the  side  of  the  lift. 
It  was  held  tliat  as  the  proximate  cause  of  this  injury  was 
the  negligence  of  the  men  who  put  S  on  the  elevator,  the 
negligence  of  the  master  in  allowing  gas  to  accumulate  in 
the  mine  was  still  not  such  as  to  make  him  liable  (7). 

5  52.  Classification  of  duties,  llie  duties  of  the  mas- 
ter to  protect  his  8er\'ants  may  be  classed  as  follows: 
To  provide  and  maintain,  by  suitable  inspection  and  re- 
pair, a  safe  place  to  work;  safe  machinery  and  appliances 
to  work  with ;  a  suflScient  force  of  competent  fellow  serv- 
ants; rules  and  regulations  for  the  ser\'ice,  properly 
made,  promulgated,  and  enforced;  and  sjiecial  instruc- 
tion, warning,  and  regulation,  provided  in  cases  of  partic- 
ular servants  or  exceptional  situations. 

§  53.  Duty  to  provide  a  safe  place  to  work.  The  mas- 
ter is  bound  to  use  reasonable  care  and  diligence  to  pro- 


(7)     TeiB  V.  Mining  Co..  158  Fed.  260. 


268  AGENCY 

vidf  his  sonnnti*  with  a  reasonably  safe  place  to  work. 
If  the  Bervant  receives  injuries  through  imnr(>|K»rIy 
li>^'hte(l  buihlinKx.  unsafe  Moors,  (Ianj?erous  hriiges,  or 
other  fault  in  the  construction  or  nuiintenancc  of  tiie 
places  where  the  master  semis  him  to  work,  the  master  is 
responsible  and  the  servant  can  ris'over  tian:a>jes  from 
liim  for  tlie  injury  (8).  Hut  if  the  place  is  unsafe  merely 
because  of  the  nature  of  the  work  and  not  through  any 
failure  «»r  the  master  to  take  reasonable  precaution  to 
make  it  safe,  then  the  master  is  not  liable.  A  high  bridge 
is  obviously  not  so  safe  a  place  to  work  as  a  law  office, 
but  the  risk  the  servant  runs  on  the  briilge  he  is  set  at 
building  is  due  not  to  the  master's  neglect  but  to  the  very 
ruiture  of  his  employment.  So  also  if  the  dangerous 
nature  of  the  place  is  due  to  its  changing  chara<'ter  under 
the  work  the  servants  themselves  are  doing  upon  it.  For 
instance,  wliere  a  servant  was  injured  in  a  gravel  pit  by 
a  slide  from  the  gravel  bank  he  was  digging  into,  he  was 
not  allowed  to  recover.  The  court  said:  "If  the  nature 
of  the  work  is  such  as  to  proiluce  changes  and  tem|>o- 
rary  conditions  in  the  place  where  the  work  is  performed, 
the  rule  does  not  re<piire  the  master  to  keep  the  place 
reasonably  safe  under  such  changed  conditions  which  the 
work  renders  necessary"  (9). 

!$  54.    Duty  to  provide  and  maintain  safe  appliances 
and  machinery.    The  master  owes  tlie  duty  of  using  rra 
sonable  care  to  provide  and  maintain  for  his  sen-ants 


(8)  Chicago  &c.  Ry.  Co.  v.  Jackson.  40  Tex.  Civ.  App.  273;  Roundy 
V.  United  Box  &c.  Co..  103  Me.  83. 

(9)  Village  of  Montgomery  v.  Robertson,  229  111.  466. 


RET^\'EFA'  PRINTIPAL  AXD   AGENT  269 

appliances  and  machinery  suitable  and  safe  for  their 
work.  Thus  a  railway  company  was  held  liable  to  an 
engineer  injured  by  the  explosion  of  the  defective  boiler 
of  his  engine,  where  the  company  by  its  agents  had  not 
taken  reasonable  care  to  see  that  he  had  Ijeen  provided 
with  a  safe  locomotive  (10).  The  master  is  not  bound 
to  use  the  best  macliiner>'  obtjiinable  nor  the  latest  im- 
provements, but  he  is  bound  to  use  appliances  reasonably 
adapted  and  safe  for  the  intended  purpose  and  under 
j (resent  day  conditions  (11).  If  the  servant  uses  api>li- 
ances  for  other  than  their  intended  j)uri)0.se,  or  does  not 
use  the  safeguarding  apparatus  provided  him,  he  cannot 
recover  (12).  For  e.xample,  a  lineman  who  neglects  to 
use  his  gloves  and  is  injured  by  a  live  wire  cannot  get 
ilamages  for  his  injury. 

§  55.  Duty  to  inspect  and  repair.  The  master  must 
use  reasonable  care,  by  proper  inspection  and  repairs, 
to  keep  the  place  where  he  ])uts  his  servants  to  work  and 
the  appliances  and  machinery  which  he  furnishes  them  in 
properly  safe  condition.  Thus  where  a  mason  was  killed 
by  the  fall  of  a  derrick  causeil  by  the  wearing  through 
of  a  steel  cable  supporting  it,  and  it  was  shown  that  no 
inspection  was  made  though  the  master  knew  the  conse- 
quences of  wear  on  the  cable  and  the  certainty  that  such 
wear  was  bound  to  occur,  the  master  was  held  liable  (i:^). 
J^ut  injuries  from  such  .defects  as  arise  in  daily  opera - 


(10)  Ford  V.  FItchburg  Ry..  110  Mass.  240. 

(11)  McDonald  v.  Cal.  Timber  Co..  94  Pac.  Rep.  376  (Cal.). 

(12)  Kauffman  v.  Maler.  94  Cal.   269;    Maitrejean  v.  Ry.  Co..  133 
N.  C.  746. 

(13)  Rinclcotti  V.  O'Brien  Contracting  Co.,  77  Conn.  617. 


270  AGENCY 

tion  of  the  machinery — defects  which  require  no  particu- 
lar skill  to  repair,  which  may  be  and  usually  are  repaired 
as  a  detail  of  the  operation  of  the  machine  by  the  operator 
himself,  with  material  furnished  by  the  master — do  not 
make  the  master  liable.  His  duty  is  fulfilled  by  an  ade- 
quate provision  of  the  means  of  repair.  Thus  where  a 
water  gauge  attached  to  a  steam  boat  boiler  was  fitted 
with  a  glass  liable  to  break  at  any  time,  and  the  operation 
of  replacing  the  broken  glass  could  be  easily  performed 
and  a  new  one  put  in  from  a  supply  ready  at  hand,  the 
duty  of  replacing  the  glass  was  held  incumbent  on  the 
engineer  in  his  character  as  servant,  and  a  failure  to 
remedy  a  breakage  by  inspection  did  not  make  the  em- 
ployer liable  (14).  The  inspection  required  must  be 
reasonably  frequent,  but  it  is  not  required  to  be  so  fre- 
quent or  so  detailed  as  seriously  to  impede  the  progress 
of  the  work.  Thus  where  an  inspector  was  sent  around 
every  afternoon  to  inspect  the  floor  of  the  sawroom  of  a 
paper  mill,  and  "to  see  that  everything  was  all  right," 
this  was  held  a  sujfficient  discharge  of  the  master's  duty 
of  inspection,  so  as  to  exonerate  him  in  a  case  where  one 
of  his  servants  had  been  injured  by  being  struck  by  a 
block  of  wood  which  fell  through  a  trapdoor  in  the  saw- 
room  floor,  carelessly  opened  by  a  workman  after  the 
daily  inspection.  The  court  said :  ' '  The  duty  of  inspec- 
tion is  one  which  must  be  enforced  in  a  reasonable  man- 
ner and  ....  does  not  require  unceasing  and  imprac- 
ticable performance"  (15). 


(14)  Manning  v.  Steamboat  Co.,  72  N.  Y.  Supp.  677. 

(15)  Peet  V.  Paper  Co.,  86  App.  Div.  (N.  Y.)  101. 


BETWEEN  PRINCIPAL  AND  AGENT  271 

§  56.  Duty  to  provide  a  sufficient  force  of  competent 
fellow  servants.  The  master  must  use  reasonable  care  to 
provide  his  servant  with  a  sufficient  force  of  fellow 
servants  to  do  with  reasonable  safety  the  work  the  ser- 
vant is  set  at.  Thus  where  S,  a  brakeman  on  a  train  of 
the  M  Co.,  was  injured  in  a  collision  with  another  train 
of  the  same  company,  and  the  cause  of  the  collision  was 
an  insufficient  force  of  brakemen  on  the  second  train,  the 
M  Co.  was  held  liable.  Nor  was  it  any  defence  that  the 
company  had  hired  the  needed  additional  brakeman  and 
he  had  failed  to  report  for  duty.  The  train  should  not 
have  been  started  out  with  an  insufficient  force  (16).  The 
master  must  also  use  reasonable  care  as  to  their  compe- 
tence in  selecting  the  servants.  He  is  bound  to  be  careful 
not  to  employ  negligent,  unskilled,  or  otherwise  incom- 
petent servants.  When  a  manager  of  the  M  Telephone 
Co.,  on  receiving  a  report  of  a  broken  wire  and  finding 
no  lineman  at  hand,  sent  out  a  young  office  man,  F,  with 
no  experience,  to  assist  a  regular  lineman,  S,  and  F 
brought  a  live  wire  in  contact  with  S's  body  so  that  S  was 
killed,  the  M  Co.  was  held  liable  for  its  breach  of  duty, 
through  its  manager,  to  provide  a  competent  fellow  ser- 
vant for  S  (17). 

§  57.  Duty  as  to  rules.  The  master  is  bound  to  use 
reasonable  care  to  make,  promulgate,  and  enforce  rules 
and  regulations  governing  the  operations  of  his  servants, 
so  as  to  afford  servants  obeying  them  a  reasonable  pro- 
tection in  the  discharge  of  their  duties.    In  the  case  of 


(16)  Flike  v.  B.  &  A.  Ry.  Co.,  53  N.  Y.  549. 

(17)  Scott  V.  lov/a  Telephone  Co.,  126  la.  574. 


272  AGENCY 

Abel  V.  Delaware  &c.  Ry.  Co.  (18),  a  car  repairer  while 
under  a  car  on  a  sidetrack  making  repairs  was  killed  by 
an  engine  backing  against  the  car.  No  regulation  to  safe- 
guard men  in  making  repairs  on  stationary  cars  had  been 
made  by  the  company,  and  on  this  account  it  was  held 
liable  to  the  representative  of  the  deceased.  It  is  not 
sufficient  to  formulate  rules ;  they  must  also  be  published, 
for  example  by  posting  them  about  the  premises  or  other- 
wise giving  servants  a  reasonable  opportunity  to  learn 
them  (19).  The  master  also  must  use  reasonable  dili- 
gence in  enforcing  rules,  and  if  they  fall  into  disuse 
through  his  failure  to  be  vigilant  in  insisting  on 
their  observance  he  is  liable  if  his  servant  is  injured 
thereby  (20). 

§  58.  Duty  as  to  special  orders,  etc.  In  addition  to 
general  rules,  the  master  has  a  duty  to  use  reasonable 
care  to  give  special  orders  in  special  cases  or  unusual  sit- 
uations (21),  and  to  give  instruction  and  warnings  to 
employes  in  case  the  putting  of  inexperienced  or  imma- 
ture workmen  at  an  unfamiliar  task,  or  at  any  task  the 
risks  of  which  are  not  patent  to  them,  would  lead  a  rea- 
sonable man  to  consider  instruction  or  cautioning  neces- 
sary. Thus  in  the  case  of  L.  &  N.  Ry.  Co.  v.  Miller  (22), 
a  switchman  who  had  had,  as  the  yardmaster  knew,  but 
five  days'  experience,  and  that  as  a  volunteer  member 
of  a  switching  crew,  was  assigned  by  this  yardmaster  to 


(18)  103  N.  Y.  581. 

(19)  strong  v.  Rutland  Ry.,  121  App.  Div.  (N.  Y.)  391. 

(20)  Merrill  v.  O.  S.  L.  &c.  Ry.  Co.,  29  Utah  264. 

(21)  Hankins  v.  N.  Y.  Ry.  Co.,  142  N.  Y.  416. 

(22)  104  Fed.  Rep.  124. 


BETWEEN  PRINCIPAL  AND  AGENT  273 

a  crew  without  further  advice,  warning,  or  instruction. 
Evidence  tended  to  show  that  four  weeks'  experience  as 
learner  was  requisite  to  acquaint  one  with  the  risks  of 
such  a  position.  The  switchman  in  the  exercise  of  his 
duties  attempted  to  make  a  coupling  which  was  new  to 
him,  and  which  could  be  done  safely  only  in  a  particular 
way  of  which  he  knew  nothing.  He  was  injured  and  the 
master  was  held  liable.  The  court  said:  **The  law  is 
now  well  settled  that  the  duty  of  cautioning  and  qualify- 
ing an  inexperienced  servant  in  a  dangerous  occupation 
applies  as  well  to  one  whose  disqualification  arises  from 
a  want  of  that  degree  of  experience  requisite  to  the 
cautious  and  skilful  discharge  of  the  duties  incident  to  a 
dangerous  occupation,  as  when  the  disqualification  is  due 
to  youthfulness,  feebleness,  or  general  incapacity.  If  the 
master  has  notice  of  the  dangers  likely  to  be  encountered, 
and  notice  that  the  servant  is  inexperienced,  or  for  any 
other  reason  disqualified,  he  comes  under  an  obligation 
to  use  reasonable  care  in  cautioning  and  instructing  such 
a  servant  in  respect  to  the  dangers  he  will  encounter, 
and  how  best  to  discharge  his  duty. ' ' 

§  59.  The  servant's  right  to  rely  upon  performance  by 
the  master.  In  the  case  of  these  duties  of  the  master  the 
servant  may  rely  on  a  performance  of  them  by  the  mas- 
ter unless  he  happens  to  know,  as  a  matter  of  fact,  that 
the  master  has  not  done  his  duty,  or  unless  a  reasonable 
person  in  the  same  circumstances  would  have  observed 
this.  He  does  not  have  to  make  any  observation  for  him- 
self (23). 


(23)     Silveira  v.  Iverson,  128  Cal.  187. 


274  AGENCY 

§  60.  Nondelegable  character  of  these  duties.  The 
duties  above  eiiuiufiated,  tlie  master  is  bound  to  see  per- 
formed. He  may  discharge  tliem  in  person  or  by  deputy, 
but  the  delegation  of  the  discharging  of  the  duty  to  a 
deputy,  even  where  tlie  master  uses  the  greatest  possible 
care  in  his  selection,  does  not  free  the  master  from  re- 
8ix)nsibility.  His  duty  is  to  have  reasonable  care  exer- 
cised in  safeguarding  the  workmen.  If  his  carefully 
selected  and  competent  foreman  should  without  warning 
become  incompetent,  and  neglect  to  provide,  for  instance, 
proper  inspection  for  a  workroom,  the  master  is  still 
liable  to  a  servant  injured  in  conse<juen<'e  of  this  neglect. 
Reasonable  care  in  selecting  a  substitute  is  not  equivalent 
to  reasonable  care  in  actually  carrying  out  the  duty  im- 
posed by  law  on  the  master.  The  master  is  e.xonerated 
in  the  case  of  delegated  duty  only  when  the  delegate  does 
in  fact  himself  exercise  reasonable  care. 

5  61.  Qualifications  of  the  rule:  In  general.  The  lia- 
bility of  the  master  is  subject  to  two  qualifications.  The 
sei-vant  may  have  voluntarily  assumed  the  risk  of  injury 
arising  from  the  master's  failure  to  discharge  any  of 
his  duties  of  protection;  or  he  may  have  contributed  to 
the  injury  through  his  own  negligence.  In  either  of  these 
cases  the  master  is  not  liable  for  the  injury  arising  from 
his  failure  to  provide  the  various  protections  under 
discussion. 

§  62.  Same:  Voluntary  assumption  of  the  risk  by 
the  servant.  We  have  seen  that  the  servant  may  pre- 
sume, in  entering  on  his  employment,  that  his  master  has 
discharged  his  duty  of  provision  against  risks ;  but  if  he 


BETWEEN  PRINCIPAL  AND   AGENT  275 

does  in  fact  know  that  the  master  has  not  performed 
these  duties,  for  instance  that  the  premises  or  machinery 
are  unsafe,  and  not  merely  knowing  their  physical  con- 
dition but  also  appreciating  the  risk  this  involves,  he 
undertakes  the  employment,  he  cannot  then  recover 
against  the  master  for  any  injury  received  from  the  non- 
fulfilment  of  the  master's  duties  in  these  regards.  His 
voluntary  assumi)tion  of  the  risk  is  a  defence  to  the  mas- 
ter. So  also,  if  after  he  has  begun  work  he  then  at  any 
time  discovers  the  master's  non-performance  of  his  duty, 
and  yet  without  complaint  and  without  any  promise  by 
the  master  or  his  representative  that  the  defect  will  be 
remedied,  he  chooses  to  go  on  working,  this  also  will  be 
a  defence  to  the  master.  A  teamster  was  injured  under 
the  following  circumstances:  He  was  driving  a  four- 
horse  lumber  wagon  which  had  no  seat,  and  the  lines  of 
which  were  too  short  for  driving  four  horses.  He  knew 
these  defects  but  continued  working  for  several  months, 
until  in  consequence  he  was  pulled  under  the  horses' 
hoofs  and  injured.  It  was  held  that  he  had  voluntarily 
assumed  the  risk  and  could  not  recover  (24).  If,  how- 
ever, the  servant  complains  of  a  defect  and  receives  a 
promise  of  repair,  he  may,  in  reliance  on  the  promise, 
continue  a  reasonable  time  using  the  defective  apparatus 
or  working  in  the  dangerous  place,  unless  the  danger  is 
so  imminent  that  no  reasonably  prudent  man  would  con- 
tinue to  work.  In  the  case  of  Anderson  v.  Seropian  (25), 
S  was  a  box-printer,  who,  after  working  a  defective  press. 


(24)  Lemberg  v.  Glenwood  Lumber  Co.,  145  Cal.  255. 

(25)  147  Cal.  201. 


276  AGENCY 

complained  to  a  foreman  that  In-  did  not  like  to  run  it  at 
the  speed  demanded  of  him.  Tlie  foreman  said,  "Go 
ahead,  and  when  you  get  far  enough  ahead  with  the  ma- 
terial for  the  box-makers  to  work  on,  why  then  we  will 
fix  tlie  machine."  S  worked  on,  and  that  afternoon  his 
hand  was  mangled  in  the  machine.  It  was  held  that  he 
had  not  assumed  the  risk,  lie  had  complained  and  iiad  a 
promise  of  repair.  liut  if  upon  complaint  the  master 
refuses  to  repair  or  makes  no  promises,  remaining  at 
work  will  })e  held  a  voluntary  assumption  of  risk. 

§  63.  Same:  What  assumption  is  voluntary.  It  is 
to  be  noted  that  the  assumption  of  risk  must  be  volun- 
tary. Hence  it  nmst  be  shown  by  the  master  that  the 
servant  both  knew  of  the  risk  and  also  appreciated  its 
character.  It  is  not  enough  to  know  the  existence  of  a 
defect;  the  servant  must  also  understand  in  general  the 
risk  its  continuance  involves.  Hence  also  if  the  servant 
is  acting  under  compulsion  he  does  not  assume  the  risk 
so  as  to  free  the  master  from  liability.  Thus  where  a 
Polish  boy,  unable  to  speak  or  understand  English,  is 
pushed  by  a  foreman  and  frightened  into  going  in  be- 
tween two  shaky  piles  of  timber  to  work,  he  has  not  as- 
sumed the  risk  of  injury  from  their  falling  (26).  But  in 
America  it  is  generally  held  that  a  mere  fear  of  loss  of 
employment,  even  if  induced  by  a  threat  of  discharge  un- 
less S  works  under  the  additional  risk,  is  not  sufficient  to 
constitute  coercion.  Thus  in  the  case  of  Lamson  v.  Axe 
Co.  (27),  S,  a  painter  of  hatchets,  complained  of  a  new 


(26)  Wells  &  Co.  V.  Gortorski,  50  111.  App.  445. 

(27)  177  Mass.  144. 


BETWEEN  PRINCIPAL  ANT)  AGENT  277 

rack  for  the  fresh-painted  hatchets  as  more  dangerous 
than  the  old,  because  the  hatchets  were  likely  to  fall  on 
him.  He  was  told  to  use  the  rack  or  leave.  He  stayed, 
and  the  accident  he  feared  happened.  When  he  sued  the 
master  he  was  held  to  have  assumed  the  risk.  The  court 
said:  ''The  plaintiff  appreciated  the  danger  more  than 
anyone  else.  He  complained  and  was  notified  that  he 
could  go  if  he  would  not  face  the  chance.  He  stayed  and 
took  the  risk.  He  did  so  none  the  less  that  the  fear  of 
losing  his  place  was  one  of  his  motives." 

§  64.  Sajne:  Contributory  negligence  of  the  servant. 
A  servant  cannot  recover  for  injuries  to  which  he  has 
contributed  directly  by  his  own  fault.  He  is  bound  to 
use  reasonable  care  to  protect  himself  from  injury.  If 
he  does  not,  and  his  lack  of  care  has  been  a  proximate 
cause  contributing  to  the  injury,  he  cannot  recover.  Thus 
where  a  servant  stepped  without  looking  into  a  well  light- 
ed elevator  shaft,  even  though  the  door,  which  should 
have  been  kept  shut,  had  been  left  open  through  another 
servant's  carelessness,  his  own  negligence  so  contributed 
to  the  accident  that  he  could  not  recover  for  injuries  from 
his  fall  (28).  For  what  constitutes  contributory  negli- 
gence see  the  article  on  Torts,  §§  191-200,  in  Volume  II  of 
this  work. 

Section  3.    Exception  to  Obligation  to  Protect: 

Fellow  Servant  Rule. 
§  65.    The  nature  of  the  fellow  servant  rule.    The  mas- 
ter is  not  bound  to  protect  the  servant  from  all  risks  in- 


(28)     Leahy  v.  U.  S.  Cotton  Co..  28  R.  I.  252. 

Vol.  1—23 


278  AiiENCY 

i'ident  to  bis  employment.  In  the  absence  of  statute  tbe 
burdens  of  these  risks  are  divided  between  the  master 
and  the  servant.  On  the  servant  the  hiw  imposes  the 
risks  ordinarily  incident  to  an  emjjloyment  of  a  given 
nature:  the  danger  from  wind  and  ice  connected  with 
bridge  building;  electric  shock  or  breaking  rope  or  wire 
incident  to  a  telephone  lineman's  work;  ami  the  similar 
hazards  arising  out  of  the  very  nature  of  any  particular 
employment.  In  a<ldition  to  these,  the  common  law  re- 
(juires  the  servant  ratlier  than  the  master  to  assume  the 
risk  of  injury  from  the  negligence  or  wilful  misdeed  of  a 
fellow  servant,  lie  has  of  course  a  right  of  action 
against  the  wrong-doer  himself,  but  not  against  the  mas- 
ter as  he  might  have  in  case  he  were  not  himself  in  the 
master's  employ.  As  we  shall  see  later  (Chapter  VI)  a 
master  is  ordinarily  liable  to  a  person  injured  by  his 
servant,  if  the  injury  is  inflicted  by  the  servant  in  the 
course  of  his  employment  and  with  an  intention  of  serv- 
ing the  master.  But  if  the  injured  person  is  a  fellow 
servant  of  the  wrong-doer,  the  master  is  not  liable  to  him. 
This  is  what  is  known  as  the  fellow  servant  rule.  It  is 
an  exception  to  the  ordinary  rule  of  agency  which  imposes 
liability  on  the  master  for  the  misdeeds  of  his  servant  in 
conducting  his  business.  The  fellow  servant  rule  places 
this  risk  of  injuries  from  a  fellow  ser^'ant,  with  the  risks 
incident  to  the  nature  of  the  business,  on  the  shoulders 
of  the  servant ;  always,  however,  leaving  him  his  remedy 
for  the  injury  against  the  actual  wrong-doer,  the  fellow 
servant  who  inflicted  the  injury.  Thus  where  an  en- 
gineer was  injured  by  reason  of  the  negligence  of  a 


BETWEEN  PRINCIPAL  AND  AGENT  279 

switchman  who  so  managed  his  switch  as  to  derail  the 
engineer's  train,  the  engineer  was  not  allowed  to  recover 
from  the  railway,  because  the  injury  was  inflicted  by  his 
fellow  servant,  the  switchman  (29). 

§  66.  Limitations  on  the  fellow  servant  rule:  Master 
liable  if  participating  in  the  injury.  It  has  been  observed 
ithat  the  actual  wrong-doer  is  liable  to  the  injured  ser\'ai)t. 
The  master  owes  the  servant  a  duty  not  to  injure  him  by 
his  own  negligence  or  wilful  wrong.  Even  if  he  works 
side  by  side  with  the  servant,  he  does  not  thereby  become 
a  fellow  servant  so  as  to  free  himself  from  liability  under 
the  fellow  servant  rule  (30).  So  also  if  the  injury  re- 
sulted from  the  master's  negligence  or  wrong  combined 
with  that  of  a  fellow  servant,  both  contributing  to  the 
injury.  Thus  where  a  fireman  was  killed  by  the  derail- 
ing of  his  engine  while  it  was  running  backward  at  high 
speed,  and  the  evidence  showed  that  the  accident  would 
not  have  happened  but  for  the  defective  condition  of  the 
track,  though  the  excessive  speed  at  which  the  engineer 
ran  was  a  contributing  cause,  the  fireman's  estate  recov- 
ered from  the  master  for  his  failure  to  use  reasonable 
care  to  provide  a  safe  place  to  work  (31). 

^  67.  Same:  Master  liable  for  a  vice-principal's 
wrong.  As  we  have  seen,  although  a  master  may  dele- 
gate his  discharge  of  the  duties  of  protection  he  owes  his 
servant  to  another,  he  does  not  therefore  relieve  himself 
of  responsibility  for  their  proper  discharge.    If  the  person 


(29)  Farwell  v.  Boston  &  Worcester  Ry.,  4  Mete.  49. 

(30)  Ashworth  v.  Stanwix.  3  El.  &  El.  701. 

(31)  Shugart  v.  Atlantic  Ry.  Co.,  133  Fed.  Rep.  505. 


280  AGENCY 

to  whom  he  delegates  them  is  a  fellow  servant  of  the  one 
injured  through  their  negligent  discharge,  his  function 
as  vice-principal,  acting  in  the  place  of  his  master,  takes 
liini  out  of  the  fellow  servant  class.  He  is  for  the  time 
being  a  representative  of  the  master  rather  than  a  fellow 
servant  of  the  servant  whom  he  injures.  His  vice-prin- 
cipalship  dejK^nds  not  on  his  relative  rank  among  his  mas- 
ter's servants,  but  on  the  character  of  his  duties  as  rei> 
resentative.  A  man  may  be  both  a  fellow  servant  and  a 
vice-princii)al,  depending  on  the  task  he  is  ui)on  at  a 
given  time.  Thus  in  the  leading  case  of  Crispin  v.  Bab- 
bitt (32),  a  general  superintendent  of  M's  iron  works  neg- 
ligently turned  on  steam  in  one  of  the  shops  and  started 
a  wheel  on  which  S  was  at  the  time  working.  This  was 
an  operative  act  rather  than  a  di>scharge  af  one  of  the 
master's  personal  duties,  so  tha^  the  general  superin- 
tendent was  for  the  time  being  a  fellow  servant  of  the 
injured  servant,  and  the  master  was  therefore  not  liable. 
On  the  other  hand,  a  servant  in  a  very  subordinate  posi- 
tion may  yet  act  as  a  vice-principal.  So  servants  em- 
ployed in  digging  a  trench  for  a  conduit  later  to  be  put 
in  by  S  were  held  not  to  be  S's  fellow  servants,  but  to  be 
performing  the  master's  duty  of  providing  a  safe  place 
(33).  So  also  servants  supplying  machinery  or  appliances, 
or  carrying  on  inspection  or  making  repairs,  are  vice- 
principals. 

§  68.    The  superior  servant  doctrine.     A  number  of 


(32)  81  N.  Y.  516.     But  see  Cody  v.  Langyear.  103  Minn.   116. 

(33)  Eichholz  v.  Mfg.  Co.,  73  N.  Y.  Supp.  842. 


BETWEEN  PRINCIPAL  AND  AGENT  281 

jurisdictions  determine  the  applicability  of  the  fellow 
eervant  rule  not  by  the  nature  of  the  task  the  servant  is 
performing,  but  by  the  grade  or  rank  of  the  servant  caus- 
ing the  injury  to  his  fellow  servant.    This  is  called  the 
"superior  servant"  doctrine,  and  in  its  most  sweeping 
form  may  be  stated  thus:    Where  one  servant  is  placed 
in  control  over  another  servant,  and  the  subordinate  is 
injured  by  the  superior  servant  in  the  course  of  the  em- 
ployment, the  master  is  liable  for  such  injury.     Some 
states  hold  this  doctrine  only  to  the  extent  that  the  master 
will  be  liable  for  injuries  resulting  from  the  negligence 
of  the  superior  servant  in  exercising  the  control  over  the 
subordinate  given  him  by  his  master.     Some  additional 
states,  though  repudiating  the  rule  generally,  hold  that 
the  general  manager  of  a  business  or  of  a  distinct  de- 
partment of  a  business  is  a  vice-principal  by  virtue  of  his 
I)osition.     So  the  general  superintendent  of  a  gas  light 
company,  and  even  the  manager  of  a  grain  elevator,  have 
been  held  vice-principals  by  virtue  of  their  position  (34). 
§  69.    The   different   department   doctrine.     Another 
variation  from  the  rule  of  the  master's  non-liability  is  the 
different  department  exception.    It  may  be  stated  thus: 
If  the  injured  servant  is  in  a  different  department  of  the 
master's  general  business  from  the  servant  who  causes 
the  injury,  the  master  is  liable,  as  such  servants  are  not 
fellow  servants.     Thus,  in  a  leading  Illinois  case,  a  la- 
borer in  a  railway  carpenter  shop  was  crossing  the  tracks 
of  the  railway,  and  was  struck  by  a  negligently  driven 

(34)     Zentner  v.  Gas  Co.,  126  Wis.  196;  Meier  v.  Way,  136  Iowa,  302. 


282  AGENCY 

locomotive.  The  railway  was  not  allowed  to  avail  itself 
of  the  fellow  servant  rule.  The  court  said  the  reason  of 
the  rule  **does  not,  nor  can  it,  apply  where  one  servant  is 
employed  in  a  separate  and  disconnected  branch  of  the 
business  from  that  of  another  senant.  A  person  em- 
ployed in  a  carpenter  shop  cannot  l)e  reijuired  to  know  of 
the  negligence  of  those  entrusted  witii  running  trains  or 
handling  engines  on  the  road"  (.15). 

s;  70.  Who  are  fellow  servants :  In  general.  It  is  gen- 
erally agreed  tliat  in  order  to  be  considered  fellow 
servants  servants  must  l>e  in  the  emi)loy  of  the  same  mas- 
ter and  in  a  common  employment.  As  we  have  just  seen, 
some  courts  hold  that  if  servants  are  in  distinct  depart- 
ments of  a  common  employment  they  are  not  fellow  ser- 
vants, and  some  courts  hold  that  if  the  negligent  servant 
is  the  su|>erior  of  the  injured  servant  they  are  not  fellow 
servants,  within  the  meaning  of  the  fellow  servant  rule. 
All  courts  agree  that  if  the  negligent  servant  is,  at  the 
time  he  commits  the  wrong  which  results  in  the  injury 
com]i]ained  of,  engaged  as  the  master's  representative  in 
discharging  any  of  the  personal  duties  which  the  master 
owes  his  servants,  he  is  not  within  the  fellow  servant  rule. 

§  71.  Same :  Servants  having  a  common  master.  Per- 
sons are  not  fellow  servants  unless  they  are  servants  of 
the  same  master,  even  though  their  employment  brings 
them  into  contact  with  each  other.  Thus  in  the  case  of 
Swanson  v.  North  Eastern  Ry.  Co.  (36),  S,  a  signal- 
man hired  by  the  Great  Northern  Ey.  and  wearing  its 


(35)  Ryan  v.  C.  &  N.  W.  Ry.,  60  111.  171. 

(36)  3  Ex.  D.  341. 


BETWEEN  PRLVCIPAL  AND  AGENT  283 

uniform,  was  employed  as  a  member  of  a  joint  station 
staff  to  signal  trains  for  the  Great  Northern  and  the 
North  Eastern  Ry.  Co.,  the  other  occupier  of  the  station. 
He  was  injured  by  the  negligent  backing  of  a  North  Eas- 
tern train  upon  him  while  he  was  at  work.  He  was  held 
not  to  be  a  fellow  sen-ant  of  the  negligent  engineer.  Thus 
also  sen-ants  of  a  master  and  an  independent  contractor, 
though  working  side  by  side  in  a  common  employment, 
are  not  fellow  servants  since  not  under  a  common  control. 
So  the  servant  of  a  teamster  working  on  a  wagon  along 
with  the  servants  of  a  steel  mill  in  getting  steel  plates 
properly  adjusted  on  the  wagon,  is  not  their  fellow  serv- 
ant, for  he  is  not  under  the  same  control  (37).  If,  however, 
S,  the  serv-ant  of  ^^,  is  transferred  to  the  service  of  N  with 
S's  knowledge  and  consent,  after  he  has  entered  on  his 
new  employment  he  becomes  a  fellow  servant  of  N's  ser- 
vants. Thus,  in  a  leading  P^nglish  case,  a  colliery  company 
had  placed  a  hoisting  engine  with  its  engineer  L  under  the 
control  of  one  W,  a  contractor  who  was  sinking  a  shaft 
under  contract  with  the  company.  L  was  paid  by  the  com- 
pany, but  was,  as  he  knew,  under  Ws  direction.  L  went 
to  sleep  at  his  post,  and  in  consequence  E,  an  employe  of 
Ws  own,  was  struck  by  a  falling  bucket  and  injured.  It 
was  held  that  L  and  R  were  fellow  servants  in  the  employ 
of  W,  though  L  was  in  the  general  employ  of  the  colliery 
company  (38).  So  also  a  volunteer  who  places  himself 
under  the  control  of  a  master  becomes  the  fellow  servant 


(37)  Otis  Steel  Co.  v.  Wingle,  152  Fed.  914. 

(38)  Rourke  v.  Colliery  Co.,  2  C.  P.  D.  205. 


284  AGENCY 

of  the  other  employes  of  the  master  workinj^  for  a  com- 
mon purpose'. 

§  72.  Same:  Servants  having  a  common  employment. 
To  be  ft'llow  servants  th»-  stTvaiils  imi>t  !•«•  in  a  common 
employment,  working  for  a  common  end.  A  nia.ster  may 
be  engaged  in  two  businesses  totally  disconnected  except 
as  to  ownershii).  The  employees  in  one  businoss  are  not 
fellow  ser\'ants  of  those  in  the  other.  Thus  where  a  hod 
carrier  employwi  by  M  on  a  building  extension  of  his 
butcher  shop  was  struck  by  a  <arelessly  driven  butcher 
cart  going  out  with  meat,  he  was  not  prevented  from  re- 
covering from  the  nuister  on  account  of  the  fellow  ser\'ant 
rule.  The  court  said  of  the  two  men:  **They  were  em- 
])loyed  under  such  tlitTerent  capacities  and  dilTerent 
classes  of  work  that  tlu-y  are  not  t<»  be  deemed  fellow  ser- 
vants engaged  in  the  same  common  work,  and  performing 
duties  and  services  for  the  same  general  puqioses'*  (39). 

§  73.  Statutory  modifications  of  the  fellow  servant 
rule.  The  fre»iuent  liarshm-ss  of  the  workings  of  the  fel- 
low sen'ant  rule  has  led  to  the  passage  of  numerous 
statutes  modifying  the  duties  and  responsibilities  of  mas- 
ters and  servants  in  regard  to  injuries  suffered  by  ser- 
vants. In  many  cases  these  statutes  apply  only  to  rail- 
ways, but  many  recent  ones  have  a  wider  application. 
In  some  states  the  superior  servant  doctrine  is  enacted 
into  law,  and  in  others  the  departmental  limitation  on  the 
fellow  sen-ant  rule,  either  by  itself  or  along  with  the 
superior  servant  limitation.  A  number  of  states  have 
passed  statutes,  some  of  them  confined  in  operation  to 


(39)     McTaggart  v.  Eastman  Co.,  28  N.  Y.  Mlflc.  127. 


BETWEEN   PRINCIPAL  AND   AGENT  285 

railways,  imposing  on  the  master  a  general  liability 
for  injury  to  a  ser\'ant  by  the  negligence  of  a  fellow  ser- 
vant, unless  the  injured  servant  has  been  contributorily 
negligent.  It  is  usually  jirovitled  in  these  statutes  that 
any  contract  by  which  the  employee  agrees  to  waive  the 
benefit  of  the  enactment  is  illegal,  and  even  without  such 
a  provision  the  courts  of  Alabama  have  held  the  contract 
void  as  opposed  to  public  policy  (40). 


(40)     HlBsong  V.   Ry.,  91   Ala.   514. 


CHAPTER  V. 

OBLIGATIONS  OF  AGENT  TO  PRINCIPAL. 

§  74.  The  duty  of  obedience.  Since  the  primary  pur- 
pose of  the  agent's  apix>iutment  is  that  he  shall  execute 
the  principal's  will,  subject  to  the  principal's  direction 
and  control  as  to  details,  one  of  his  cardinal  duties  Is 
obedience  to  that  will.  For  losses  to  the  principal  result- 
ing from  the  agent's  disobedience  the  agent  is  liable,  even 
though  he  acted  in  entire  good  faith  and  in  the  exercise 
of  his  own  best  judgment  when  he  disregarded  the  prin- 
cipal's wishes.  Thus  where  a  collector  for  a  bank,  when 
exercising  great  care  of  the  moneys  he  had  collected,  but 
disobeying  the  express  instructions  of  the  bank  as  to  the 
disposition  of  the  funds,  was  robbed  of  them,  he  was  re- 
sponsible to  the  bank  for  the  loss  (1). 

§  75.  Same:  Gratuitous  agents.  Even  if  the  agent  is 
to  get  nothing  for  his  sei'vices,  if  he  has  undertaken  to  act 
for  the  principal  and  has  embarked  on  the  performance 
of  his  task,  he  is  liable  if  he  does  not  obey  his  principal. 
Thus  where  A  voluntarily  and  gratuitously  undertook  to 
invest  the  money  of  a  widow,  and  she  gave  him  express 
instructions  to  invest  it  in  a  mortgage  on  a  certain  farm 
property,  when  he  disregarded  the  instructions  he  was 
held  liable  to  his  principal  for  a  loss  she  thereby  sus- 


(1)     Rechtscherd  v.  Bank,  47  Mo.  181. 

286 


BETWEEN  PRINCIPAL  AND  AGENT  287 

tained  (2).  If,  however,  the  gratuitous  agent  has  never 
entered  on  the  performance  of  his  voluntarily  assumed 
duties,  he  is  not  liable  for  damages  resulting  from  his  non- 
action, there  being  no  consideration  to  support  his  under- 
taking to  act  (3). 

§76.  Same:  Exceptions.  An  agent  is  not  bound  to 
obey  an  instruction  to  do  an  illegal  or  immoral  act.  In  a 
case  where  urgent  necessity  or  a  very  grave  emergency, 
not  admitting  of  delay  for  consultation  with  the  principal, 
causes  a  deviation  from  instnictions,  the  agent,  if  he 
uses  in  good  faith  his  own  best  judgment,  will  be  excused, 
even  though  it  later  appears  that  another  course  would 
have  been  preferable.  In  the  case  of  Bartlett  v.  Spark- 
man  (4),  A  was  asked  by  P  to  go  for  Dr.  X,  as  P's  wife 
was  very  sick.  When  A  reached  X  's — fourteen  miles  from 
P's  house — X  was  out,  and  A  got  Dr.  Y.  P  was  held 
bound  by  A's  act  to  pay  Dr.  Y.  Again  though  an  agent 
as  agent  must  obey  orders,  he  may  also  have  a  right,  in 
another  capacity  than  that  of  agent,  to  act  independently 
as  to  the  same  subject  matter.  P  sent  A,  a  commission 
merchant,  coffee  to  sell,  with  instructions  as  to  the  selling 
price.  A  made  P  a  large  advance  of  money  on  the  con- 
signment, and  P  did  not  repay  the  advance.  After  a  con- 
siderable time  had  elapsed  A  sold  the  goods  for  what  he 
could  get  for  them,  which  was  less  than  the  price  fixed, 
and  after  deducting  the  amount  of  his  advances  sent  P 
the  proceeds  of  the  sale.    P  sued  A  for  damages  for  dis- 


(2)  Williams  v.  Higgins,  30  Md.  404. 

(3)  Thorn  v.  Deas.  4  Johns.  84. 

(4)  Bartlett  v.  Sparkman,  95  Mo.  ISS. 


288  AGENCY 

obedience.  But  it  was  held  that  A  as  pledgee  had  the 
right  to  protect  himself  which  was  indeiiendent  of  his 
duty  as  agent  (5). 

§  77.  Loyalty.  Another  cardinal  duty  of  the  agent  is 
to  act  in  entire  loyalty  and  in  the  utmost  good  faith  to- 
ward his  principal.  The  presumable  reason  for  his  em- 
ployment is  that  it  was  sought  to  secure  the  exercise  of 
his  skill,  knowledge,  and  good  judgment  on  the  principal's 
behalf.  Moreover  the  agent's  advantage  of  knowledge 
over  the  principal  as  to  the  transactions  in  which  the 
agent  is  a  direct  participant  emphasizes  the  need  of  secur- 
ing the  agent's  fidelity.  If  A  is  not  acting  in  P's  interests 
but  rather  in  his  own  or  some  third  party's,  the  purpose 
for  which  the  agency  was  created  is  defeated.  It  is  a  jeal- 
ously enforced  rule  of  law,  then,  that  the  agent  shall  not 
be  allowed  to  occupy  a  position  which  will  even  tend  to 
lead  to  a  betrayal  of  his  trust.  Where  the  agent  of  a 
woman  principal  induced  her  to  invest  her  capital  in  a 
company  heavily  in  debt,  and  in  which  he  was  a  leading 
shareholder,  and  did  this  without  disclosing  these  facts 
to  her,  he  was  held  liable  for  a  loss  she  suffered  through 
the  investment,  even  though  no  wrongful  intent  on  his 
part  was  alleged  or  proved  (6).  Even  after  the  agent  has 
left  the  principal's  employment,  he  may  be  prevented  by 
an  injunction  from  revealing  to  his  new  employer  trade 
secrets  learned  in  working  for  his  former  principal  (7). 

§  78.    Same:    Agent  cannot  make  personal  profit  out 


(5)  Parker  v.  Brancker,  22  Pick.  40. 

(6)  Sterling  v.  Smith,  97  Cal.  343. 

(7)  Merryweather  v.  Moore,  (1892)   2  Ch.  518. 


BETWEEN  PRINCIPAL  AND  AGENT  289 

of  his  transactions.  Apart  from  his  lawful  compensation, 
commission,  or  salary,  an  agent  can  make  no  profit  from 
a  transaction  in  which  he  represents  a  principal.  If  for 
example  by  using,  without  the  principal's  knowledge  or 
consent,  information  acquired  in  the  transaction,  he  makes 
any  profit  for  himself,  the  principal  may  compel  him  fo 
account  for  it.  So  if  an  agent  sells  property  entrusted 
to  him  for  sale  at  a  higher  price  than  that  set  by  the  prin- 
cipal, or  a  higher  price  than  that  which  he  represents  to 
his  principal  that  he  received;  or  if  a  purchasing  agent 
buys  for  less  than  the  price  set,  in  all  these  cases  they 
must  surrender  their  gains  to  the  principal  (8).  So  also 
if  an  agent  is  employed  to  sell  or  lease  P's  property  he 
cannot  without  P's  consent  sell  directly  or  indirectly  to 
himself,  or  to  a  third  party  through  whom  he  will  acquire 
title  to  the  property  or  some  benefit  in  it.  P  may  re- 
pudiate the  transaction  and  recover  the  property  (9).  If 
an  agent  is  employed  to  buy  or  lease  he  cannot  buy  from 
himself,  nor  can  he  buy  or  lease  such  property  for  himself 
without  the  principal's  consent  (10.)  So  rigidly  are  these 
rules  enforced  that  no  custom  of  a  market  allowing  the 
agent  to  deal  with  the  principal  on  his  own  behalf  will  be, 
unless  the  principal  consents,  an  excuse  to  the  agent  for 
the  breach  of  this  duty  (11). 

§  79.    Same:    Agent  cannot  represent  both  parties.  An 
agent  cannot  secretly  represent  the  other  party  in  any 


(8)  Wooster  v.  Nevills,  73  Cal.  58;  N.  P.  R.  Co.  v.  Kindred,  14  Fed. 
Rep.  77. 

(9)  Winter  v.  McMillan,  87  Cal.  256. 

(10)  National  Bank  v.  Seward,  106  Ind.  264. 

(11)  Robinson  v.  Mollett.  L.  R.  7  H.  L.  802. 


290  AGENCY 

transaction  on  behalf  of  bis  principal  in  wbicb  bis  discre- 
tion is  enlisted  (12),  If,  however,  his  work  is  merely  to 
bring  the  parties  togetiier,  and  has  nothing  to  do  with  the 
formation  of  the  contract,  be  may  thus  act  for  both  (13). 
But  wherever  his  duty  to  one  principal  nuiy  |)Ossibly  con- 
flict with  his  service  to  a  second,  he  cannot  serve  the 
second  also  without  the  knowledge  and  consent  of  the  first. 
Of  course  if  the  agent  makes  a  full  disclosure  of  all  mater- 
ial facts  concerning  the  transaction,  the  principal  may 
waive  bis  rights  under  the  rule.  He  may  allow  the  agent 
to  represent  himself  or  a  third  party. 

§  80.  Care,  skill,  and  diligence:  Paid  agent.  An  agent 
who  acts  for  a  valuable  consideration  is  bound  to  possess 
and  exercise  such  care,  skill,  and  diligence  as  are  exer- 
cised by  careful  and  prudent  persons  engaged  in  such 
undertakings  under  similar  circumstances.  "Care  and  dil- 
igence should  always  vary  according  to  the  exigencies 
which  require  vigilance  and  attention,  conforming  in 
amount  and  degree  to  the  particular  circumstances  under 
which  they  are  exerted"  (14).  Thus  a  country  physician  is 
not  required  to  have  the  skill  in  treating  an  infected  band 
that  a  metropolitan  surgeon  would  be  held  to.  But  reason- 
able care,  skill,  and  diligence  may  always  be  demanded. 
So  when  an  attorney  undertakes  to  act  in  a  suit  for  a 
principal,  be  is  liable  if,  because  be  does  not  possess  or  ex- 
ercise the  amount  of  skill  ordinarily  exercised  by  a  man  in 
that  calling,  his  principal  is  injured.    An  agent  to  loan 


(12)  Rice  V.  Wood.  113  Mass.  133. 

(13)  Rupp  V.  Sampson.  16  Gray  398. 

(14)  Holly  V.  Gaslight  Co.,  8  Gray  123. 


BETWEEN  PRINCIPAL  AND  AGENT  291 

money  is  liable  for  a  failure  to  take  due  care  to  obtain 
security.  An  agent  authorized  to  take  out  insurance  must 
inquire  as  to  the  solvency  of  the  company  and  the  ade- 
quacy of  the  policy. 

§  81.  Same:  Gratuitous  agent.  Even  when  an  agent 
acts  gratuitously,  if  he  professes  to  have  special  skill,  he 
is  liable  if  he  does  not  exercise  it.  If  he  makes  no  profes- 
sion he  is  liable  if  he  is  negligent  judged  by  the  ordinary 
standard  set  for  such  gratuitous  services  (15).  In  any 
case  he  is  liable  if  he  fails  to  exercise  the  skill  which  he 
actually  possesses.  Where  A,  a  skilful  rider,  at  his  own 
request  was  given  by  P  a  horse  to  show  to  T  for  the  pur- 
pose of  negotiating  a  sale,  and  A  rode  the  horse  upon 
slippery  ground  where  it  fell  and  broke  a  knee,  it  was  held 
that  A  was  liable  for  failing  to  use  such  skill  in  horseman- 
ship as  he  really  possessed  (16). 

§  82.  Accounting.  The  agent  is  bound  to  keep  correct 
accounts  of  his  transactions  and  to  account  to  his  prin- 
cipal for  all  money  or  property  which  comes  to  his  hands 
from  the  principal.  If  he  commingles  these  with  his  own 
so  that  they  cannot  easily  be  distinguished,  everything 
which  he  cannot  clearly  prove  to  be  his  will  be  held  to  be- 
long to  the  principal  (17). 

§  83.  Communication.  The  agent  must  give  notice  to 
his  principal  of  all  material  facts  coming  to  his  knowledge 
in  relation  to  the  subject  matter  of  the  agency  (18).   The 

(15)  See  Briggs  v.  Spaulding,  141  U.  S.  132— a  case  of  bank 
directors. 

(16)  Wilson  V.  Brett,  11  M.  &  W.  113. 

(17)  Gray  v.  Haig,  20  Bev.  219. 

(18)  Devall  v.  Burbridge,  4  Watts  &  S.  305. 


292  AGENCY 

third  parties  who  deal  with  him  have  a  right  to  exi^ect 
that  communications  made  to  him  will  be  binding  on  the 
principal,  and  the  agent  owes  to  the  principal  that  these 
communications  be  transmitted  to  the  principal  for  his 
guidance  in  the  general  direction  of  the  enteri^rise. 

§  84.  Personal  discharge  of  his  functions  as  agent. 
The  agent  owes  his  appointment  to  the  principal's  con- 
fidence in  his  fidelity  and  his  capacity  for  the  particular 
task  he  is  engaged  for — in  other  words  to  his  personal 
qualities.  Hence  unless  the  princi})al  has  expressly  or 
impliedly  consented  to  the  employment  of  a  substitute, 
the  agent  must  render  his  service  in  person.  A  publish- 
ing house  appointed  A  an  agent  to  handle  a  subscription 
book  of  such  immediate  interest  as  to  need  very  rapid 
distribution,  and  the  court  found  also  as  follows:  ''From 
a  consideration  of  all  the  correspondence  and  circulars 
connected  therewith  it  is  apparent  that  the  contract  was 
purely  one  of  agency.  Both  parties  to  the  contract  evi- 
dently believed  that  the  success  of  the  publication  depend- 
ed on  the  experience,  skill,  and  energy,  as  well  as  on  the 
resources  and  facilities  of  the  general  agent."  It  was 
held  that  A  violated  his  duty  to  P  by  transferring  the  task 
to  another  (19).  So  also  agents  to  sell,  buy,  or  lease 
property,  attorneys,  arbitrators,  executors,  auctioneers, 
and  in  general  all  agents  whose  duties  require  training, 
skill,  judgment,  or  other  personal  qualities,  cannot  dele- 
gate their  authority.  But  an  express  power  to  delegate 
may  be  given,  and  the  appointment  to  certain  agencies 


(19)     Bancroft  v.  Scribner,  72  Fed.  988. 


BETWEEN  PRINCIPAL  AND   AGENT  293 

implies  consent  on  the  part  of  the  principal  that  the  agent 
may  act  through  a  substitute. 

§  85.  Same:  Ministerial  acts.  Where  the  duties  to  be 
performed  are  mechanical  or  ministerial  the  agent  is  al- 
lowed to  delegate  them.  Thus  an  agent  to  execute  a 
promissory  note,  if  he  has  himself  decided  to  make  the 
note,  may  direct  his  book-keeper  to  write  the  instru- 
ment (20). 

§  86.  Same:  Delegation  customary  in  the  particular 
business.  When  the  principal  should  reasonably  contem- 
plate the  employment  of  sub-agents  as  a  normal  or  neces- 
sary way  of  transacting  the  particular  sort  of  business  he 
entrusted  to  the  agent,  he  will  be  held  to  have  impliedly 
consented  to  the  delegation.  So  an  agent  given  general 
charge  of  a  large  lumber,  ranch,  and  mining  company's 
business,  could  delegate  to  a  sub-agent  the  purchase  of 
blasting  supplies  (21).  So  also  in  cases  of  transactions 
as  to  which  it  is  a  well  known  business  custom  of  agents 
to  delegate  authority  to  sub-agents,  the  principal  im- 
pliedly gives  consent  to  such  a  substitution  unless  he  ex- 
pressly repudiates  it.  A,  a  commission  merchant  in  Bos- 
ton, was  employed  to  buy  goods  in  New  Orleans.  It  was 
the  well  understood  custom  of  the  New  Orleans  market 
for  commission  merchants,  on  receiving  an  order  to  buy 
for  a  northern  account,  to  employ  a  cotton  broker,  and  A 
did  this.  It  was  held  that  A  had  not  thereby  violated  any 
duty  to  his  principal  (22). 


(20)  Commercial  Bank  v.  Norton,  1  Hill  501. 

(21)  Luttrell  v.  Martin,  112  N.  C.  593. 

(22)  Darling  v.  Stanwood,  14  Allen  504. 

Vol    1—24 


294  AGENCY 

§  87.  Consequences  of  a  permitted  delegation.  In  all 
these  cases,  if  the  right  to  delegate  authority  to  a  sub- 
agent  is  found,  the  principal  will  be  liable  to  third  parties 
for  the  acts  of  the  sub-agent.  Whether,  liowever,  the 
principal  will  be  able  to  recover  against  his  original  agent 
for  an  injury  through  the  negligence  or  otherwise  of  a 
sub-agent,  depends  on  the  interpretation  of  the  contract 
between  the  principal  and  the  original  agent.  If  the  agent 
employs  the  sub-agent  as  a  complete  substitute  for  him- 
self, in  other  words  if  the  contract  is  that  the  original 
agent  is  to  appoint  another  i>erson  agent  in  his  stead  for 
the  principal,  then  he  himself  is  liable  to  the  principal 
only  if  he  has  been  negligent  in  the  selection  of  the  second 
agent.  If,  however,  the  agent  is  authorized  only  to  ap- 
point the  sub-agent  as  his  own  assistant,  this  substitute 
is  the  agent  of  the  agent  and  not  of  the  principal,  and  the 
original  agent  is  liable  to  the  principal  for  the  cariying 
out  of  the  agency.  Different  courts  interpret  the  same 
contract  in  this  matter  in  different  ways;  for  example, 
where  a  bank  appoints  a  sub-agent  to  collect  a  note  at  an- 
other place  for  a  customer  of  the  bank,  the  agent  at  the 
place  of  collection  is  held  by  many  courts  to  be  the 
agent  of  the  owner  of  the  note,  but  by  others,  including 
the  Federal  courts,  to  be  the  agent  of  the  bank  (23). 

(23)     Exchange  Bk.  v.  Third  Nat.  Bk.,  112  U.  S.  289;   Dorchester  Bk. 
V.  New  Enghmd  Bk.,  1  Cush.  177. 


PART  11. 

THE  RELATION  AS  BETWEEN  PRINCIPAL  AND 
THIRD  PARTY. 

CHAPTER  VI. 
PRINCIPAL'S  RESPONSIBILITY  FOR  TORTS  OF  AGENT. 

§88.    Reason  for  holding  the  principal  responsible. 

With  the  power  given  a  master  to  act  through  representa- 
tives under  legal  sanction  and  protection,  the  law  couples 
a  responsibility  on  the  part  of  the  principal  for  the  acts 
of  his  agents  in  their  representative  capacity.    Hence  a 
principal  is  liable  to  third  parties  for  the  use  made  by  the 
agent  of  the  authority  the  principal  has  vested  in  him. 
This  authority  may  be  so  used  or  abused  as  to  involve 
the  principal  in  obligations  under  a  contract  or  in  liability 
for  a  tort.     While  it  is  obviously  just  that  a  principal 
should  be  liable  for  acts  done  in  accord  with  his  will  and 
instructions,  expediency  dictates,  as  the  trend  of  a  long 
course   of   judicial   decisions    shows,   that    a   principal 
should  be  held  responsible  not  only  for  the  acts  he  has  ex- 
pressly or  impliedly  authorized,  but  also  for  acts  which 
his  authorization  made  possible,  even  though  he  did  not 
contemplate  them— acts  the  result  of  the  agent's  care- 
lessness,   stupidity,    or    viciousness,    but    owing    their 
genesis  to  the  employment.    Here  the  limits  of  responsi- 
bility are  fixed  by  a  balance  between  the  desire  to  hold 

295 


296  AGENCY 

the  employer,  who  is  responsible  because,  in  Lord  Broug- 
ham's often  quoted  phrase,  '*he  has  set  the  whole  thing 
in  motion,"  and  on  the  other  hand  to  extend  the  field  of 
representative  action,  with  all  its  invaluable  economic 
advantages,  without  checking  it  by  holding  employers 
liable  for  misconduct  on  the  part  of  their  employees, 
which  they  could  not  reasonably  contemplate  or  did  their 
best  to  prevent.  Out  of  these  coniflicting  ends  to  be  at- 
tained the  rules  have  arisen  to  fix  the  liability  of  the  prin- 
cipal for  the  torts  of  his  agent. 

§  89.  Torts  actually  authorized.  If  the  tort  is  ex- 
pressly commanded  the  master  is  liable.  M,  who  claimed 
a  piece  of  land,  instructed  his  servant,  S,  to  enter  upon  it, 
by  force  if  necessary.  S  did  so,  entering  the  land  and 
starting  to  plow  it.  T,  the  rightful  owner,  tried  to  stop 
the  plowing,  and  S  pushed  him  away  with  great  violence. 
It  was  held  that  M  was  liable  not  only  for  the  trespass 
on  the  land  but  also  for  the  further  act  done  in  carrying 
out  the  instructions  (1).  The  authorization  may  be  by 
ratification  as  well  as  by  previous  direction.  If  the  act 
is  not  one  authorized,  but  the  form  of  the  instruction,  not 
unreasonably  interpreted,  led  the  servant  to  think  he  was 
so  authorized,  the  master  is  liable.  Thus  if  M  tells  S  to 
go  and  get  T  's  team  from  the  stable  and  use  it,  and  S  gets 
it  without  asking  T's  permission,  and  in  using  it,  by  his 
lack  of  skill  lets  a  horse  be  killed,  M  is  liable  (2). 

§  90.  Torts  necessarily  or  usually  incident  to  an  au- 
thorized course  of  action.    Again,  if  the  act  complained 


(1)  Barden  v.  Felch,  109  Mass.  154. 

(2)  Moir  V.  Hopkins,  16  111.  313. 


BETWEEN  PRINCIPAL  AND  THIRD  PARTY      297 

of  is  a  necessary  or  usual  incident  to  the  actually  author- 
ized act  or  course  of  action,  the  master  is  liable  to  the  in- 
jured third  party  for  its  commission.  Thus,  a  salesman 
left  in  charge  of  a  store  has  implied  authority  to  cause  the 
arrest  of  a  shopper  suspected  of  theft.  Where  such  a 
salesman,  erroneously  thinking  T  had  stolen  some  goods, 
had  her  arrested,  his  master  was  held  liable  for  the 
tort  (3). 

§  91.  Unauthorized  torts  committed  in  the  com  je  of 
the  servant's  employment  and  in  intended  furtherance  of 
the  master's  business.  Even  if  the  act  is  not  authorized, 
still  if  the  servant  did  it  in  the  course  of  his  employment 
and  in  intended  furtherance  of  the  master's  business,  the 
master  is  liable.  But  the  servant  must  be  acting  in  the 
work  for  which  the  master  hired  him.  If  a  gardener  with- 
out authority  takes  his  master's  chauffeur's  place,  and 
through  his  incompetence  a  third  party  is  injured,  the 
master  is  not  liable.  The  act  was  not  done  in  the  course 
of  the  work  for  which  the  gardener  was  employed  (4). 
And  the  act  must  be  with  an  eye  to  the  master's  business. 
If  its  sole  object  is  the  benefit  of  the  servant  himself,  then 
(with  one  exception,  to  be  noted  later)  the  master  is  not 
liable.  Thus  if  S,  M's  delivery  driver,  while  he  is  using 
the  horses  to  take  home  a  personal  friend  of  his  own,  in- 
jures T,  M  is  not  liable  (5).  S  was  not  acting  with  an 
eye  to  his  master's  business,  even  though  engaged  in  the 
work  for  which  he  was  hired.    But  if  both  these  tests  con- 


(3)  staples  v.  Schmidt,  18  R.  I.  224. 

(4)  See  Hanson  v.  Waller,   (1901)   1  K.  B.  390. 

(5)  Mitchell  v.  Crassweiler.  13  C.  B,  237. 


298  AGENCY 

cur — if  the  act  was  done  in  the  course  of  the  servant's  em- 
ployment and  with  an  eye  to  the  master's  benefit— how- 
ever negligently  done  or  however  mistakenly  as  to  the 
ultimate  benefit  to  the  master,  the  master  is  liable.  So 
where  a  servant  employed  at  general  farm  labor,  in  driv- 
ing out  some  cows  which  had  strayed  into  his  master's 
grain  field,  struck  one  with  a  heavy  stone  and  killed  it, 
the  master  was  liable  for  the  damage  done  to  T's  prop- 
erty. The  act  of  driving  the  cows  out  was  done  with  the 
intention  of  benefiting  the  servant's  master,  and  it  was 
such  an  act  as  the  servant  was  hired  for,  though  the  means 
chosen  were  badly  adapted  to  the  end  sought  (6).  Negli- 
gence, carelessness,  and  even  stupidity,  in  pursuing  the 
course  of  the  servant's  employment,  and  for  the  master's 
ends,  are  not  sufiicient  to  remove  the  act  from  among 
those  making  the  master  liable.  The  possibility  that  acts 
done  through  a  representative  may  be  done  unskilfully 
or  negligently  is  an  obvious  one,  and  the  risk  that  third 
parties  will  be  injured  thereby  is  placed  by  the  law  on  the 
master. 

§  92.  Same:  Wilful  acts.  Even  where  the  servant 
wilfully  injures  a  third  party,  the  same  question  arises : 
Was  he  acting  in  the  scope  of  his  employment !  If  he  is 
not  acting  in  his  capacity  as  servant — as  where  a  street 
car  motorman,  who  had  been  insulted  by  a  drunken  pas- 
senger, left  his  car  when  the  latter  got  off  and  struck  him 
with  the  controller  lever — the  master  is  not  liable  (7). 


(6)  Evans  v.  Davidson,  53  Md.  245. 

(7)  Palmer  v.  Electric  Co.,  131  N.  C.  250.    See  Limpus  v.  Omnibus 
Co.  1  H.  &  C.  52(k. 


BETWEEN  PRINCIPAL  AND  THIRD  PARTY      299 

So  if  the  gardener  in  the  case  supposed  above  takes  the 
auto,  though  forbidden  to  do  so,  with  an  eye  to  catching 
a  train  on  which  his  master  is  coming,  his  intent  to  benefit 
the  master  will  not  make  the  master  liable  to  a  person 
injured  by  the  gardener's  incompetent  driving.    On  the 
other  hand,  if  the  chauffeur,  driving  the  car  he  is  hired  to 
operate,  deliberately  runs  down  a  private  enemy,  the  mas- 
ter would  not  be  liable.    But  if  the  chauffeur,  though  for- 
bidden to  run  faster  than  ten  miles  an  hour,  thinks  to 
catch  his  master's  train  by  going  fifteen  miles  an  hour, 
his  wilful  disobedience  will  not  free  the  master  from  lia- 
bility.   In  Garretsen  v.  Duenckel  (8),  M  was  the  keeper 
of  a  gun  store.    He  had  forbidden  S,  his  clerk,  to  load 
weapons  in  the  store.    On  the  occasion  of  the  injury  to  T, 
S  was  showing  a  rifle  to  a  customer  who  requested  to  have 
it  loaded  in  order  that  he  might  see  how  it  worked,  and 
refused  to  buy  otherwise.    S  at  first  declined,  stating  that 
it  was  against  his  orders.    But  for  the  purpose  of  making 
the  sale  he  finally  did  load  the  gun,  and  while  he  was  do- 
ing so  it  went  off  and  shot  T,  who  was  standing  on  the  op- 
posite side  of  the  street.  The  court  in  an  excellent  opinion 
said:    ''The  servant  here  was  unquestionably  aiming  to 
execute  the  order  of  his  principal  or  master.    He  was  act- 
ing within  the  scope  of  his  authority  and  engaged  in  the 
furtherance  of  his  master's  business.     There  is  no  pre- 
tense that  he  was  trying  to  do  anything  for  himself.    He 
was  acting  in  pursuance  of  authority  and  trying  to  sell  a 
gun,  to  make  a  bargain  for  his  master,  and  in  his  eagerness 
to  subserve  his  master's  interest  he  acted  injudiciously 


(8)     Garretsen  v.  Duenckel,  50  Mo.  104. 


300  AGENCY 

and  negligently.  It  makes  no  difference  that  he  disoheyed 
instructions.  Innocent  third  parties  who  are  injured  by 
his  acts  cannot  be  affected  thereby. ' ' 

§93.  Sajne  (continued).  Even  if  an  agent's  purpose 
is  partly  selfish,  if  at  the  same  time  he  retains  some,  how- 
ever little,  intent  of  serving  his  master's  interest  and  also 
acts  in  the  course  of  his  emplojTnent,  the  master  is  lia- 
ble. In  Phelon  v.  Stiles  (9)  S  was  sent  by  his  master,  M, 
to  deliver  twenty  bags  of  flour  to  X  and  six  bags  to  Y. 
When  on  his  way  to  X's  he  came  to  the  road  branching 
off  to  Y's,  he  unloaded  Y's  flour  and  left  it  piled  by  the 
roadside.  The  pile  frightened  T's  horse  so  that  T  was  in- 
jured and  sued  M.  M  showed  that  S  had  piled  the  bags  so 
as  to  get  through  his  task  more  quickly,  that  he  might 
catch  a  train  for  a  journey  of  his  own.  But  M  was  held 
liable.  The  business  S  was  on,  was  M's  business,  and 
though  S  acted  negligently,  induced  by  his  own  ends,  still 
the  act  done  did  not  become  S  's  business  merely  because 
he  dispatched  it  more  quickly  on  account  of  a  purpose 
of  his  own.  In  general,  then,  the  wilfulness  of  the  ser- 
vant's act  is  immaterial  if  it  is  done  in  the  course  of  the 
servant's  employment,  and  with  any  idea  of  benefiting 
the  master.  Disobedience  and  recklessness,  just  as  negli- 
gence, are  risks  which  the  master  must  assume  so  far  as 
third  parties  are  concerned. 

§  94.  Same:  Fraud.  This  doctrine  applies  in  the  case 
of  an  agent's  fraud.  If  the  fraud  is  committed  for  the 
principal's  benefit,  the  principal  is  liable.  In  a  leading 
case  the  facts  were  these.    T  had  been  selling  oats  to  one 


(9)     Phelon  v.  Stiles,  43  Conn.  426. 


BETWEEN  PRINCIPAL  AND  THIRD  PARTY      301 

D,  and  applied  to  the  P  bank,  of  which  D  was  a  customer, 
for  a  guarantee  of  D's  solvency.  A,  the  manager  of  the 
bank,  promised  T,  on  condition  that  T  sold  oats  to  a  cer- 
tain amount  to  D,  to  honor  D's  check  to  T  in  priority  over 
any  other  payment  made  by  D,  except  payments  on  his 
debt  to  the  bank.  A  knew  that  D  could  not  discharge  his 
debt  to  the  bank,  but  concealed  this  fact  from  T.  T  sold 
the  oats  and  took  D's  check,  which  the  bank  declined  to 
cash.  It  was  held  that  there  was  in  these  transactions  evi- 
dence from  which  a  jury  might  well  hold  that  the  manager 
knew  and  meant  the  guarantee  he  gave  to  be  unavailing, 
but  gave  it  as  a  means  of  enabling  D  to  get  money  from  T, 
so  that  he  might  pay  it  over  to  the  bank.  If  so,  the  court 
held,  this  act  of  A's  was  a  fraud  on  T,  and  for  it  the  bank 
would  be  responsible.  As  the  court  said,  *'No  sensible  dis- 
tinction can  be  drawn  between  the  case  of  fraud  and  the 
case  of  any  other  wrong.  The  master  is  answerable  for 
every  such  wrong  of  the  servant  or  agent  as  is  committed 
in  the  course  of  the  service  and  for  the  master's  benefit. 

It  is  true,  he  has  not  authorized  the  particular  act, 

but  he  has  put  his  agent  in  his  place  to  do  that  class  of 
acts,  and  he  must  be  answerable  for  the  manner  in  which 
the  agent  has  conducted  himself  in  doing  the  business 
which  it  was  the  act  of  his  master  to  place  him  in'*  (10). 
§  95.  Special  liability  of  the  master  in  cases  of  con- 
tract with  a  third  party.  In  certain  cases,  by  exception, 
a  master  is  liable  for  acts  of  his  servant  done  in  the  course 
of  his  employment,  even  when  not  done  with  an  eye  to  the 
master's  interest,  but  solely  for  the  servant's  own  ends. 


(10)     Barwick  v.  English  Bank,  L.  R.  2  Ex.  259. 


302  AGENCY 

This  is  because  of  the  existence  of  some  special  duty  im- 
posed on  the  master  by  law.  An  example  is  the  duty  of 
care  of  passengers  imposed  by  law  as  an  incident  of  the 
contract  of  a  common  carrier  with  passengers  on  its  road. 
As  the  court  said  in  such  a  case,  after  laying  down  the 
rule  that  the  one  question  was  whether  the  act  was  in  the 
course  of  his  employment,  ''However  that  may  be  in  gen- 
eral, there  can  be  no  doubt  of  it  in  those  employments  in 
which  the  agent  performs  a  duty  of  the  principal  to  third 
persons,  as  between  such  third  persons  and  the  principal. 
Because  the  principal  is  responsible  for  the  duty,  and  if  he 
delegate  it  to  an  agent,  and  the  agent  fail  to  perform  it, 
it  is  immaterial  whether  the  failure  be  accidental  or  wil- 
ful, in  the  negligence  or  in  the  malice  of  the  agent;  the 
contract  of  the  principal  is  equally  broken  in  the  negli- 
gent disregard,  or  the  malicious  violation,  of  the  duty  by 
the  agent"  (11). 

§  96.  Same:  Where  the  master  has  entrusted  a  dan- 
gerous instrumentality  to  the  servant.  Again,  the  nature 
of  the  task  entrusted  to  the  servant  may  be  such  that  the 
master  is  liable  beyond  the  limits  of  the  ordinary  rule. 
Thus  if  he  has  entrusted  a  dangerous  instrumentality  to 
the  servant  he  is  liable  for  any  use  the  servant  makes  of  it, 
however  far  removed  any  idea  of  benefiting  the  master 
was  from  the  servant's  mind.  Thus  in  Texas  Ry.  Co.  v. 
Bcoville  (12),  T  was  riding  on  horseback  along  a  road 
which  paralleled  the  railway  track  when  the  engineer  and 
fireman  of  a  passenger  train  with  deliberate  intention  of 


(11)  Craker  v.  C.  &  N.  W.  Ry.  Co.,  36  Wis.  657,  659. 

(12)  Texas  &  P.  Ry.  Co.  v.  Scoville,  62  Fed.  Rep.  730. 


BETWEEN  PKINCIPAL  AND  THIRD  PAKTY      303 

amusing  themselves  by  frightening  the  horse,  and  with  no 
legitimate  purpose  whatever,  blew  the  locomotive  whistle 
until  T  was  seriously  injured  by  his  plunging  animal.  It 
was  held  that  the  railway  company  was  liable,  despite  the 
fact  that  the  servants,  though  acting  in  the  course  of  their 
employment,  clearly  acted  in  complete  disregard  of  the 
master's  interests,  and  solely  for  their  own  purposes. 
The  court  said:  "Public  policy  and  safety  demand  that 
these  all-pervading  corporations  which  commit  to  the  cus- 
tody and  use  of  their  servants  in  such  great  numbers  these 
terrible  expressions  of  the  powerful  and  dangerous  agency 
of  steam  shall  by  the  utmost  care  and  diligence  protect 
the  public,  not  only  from  its  negligent  but  also  from  its 
wanton  or  malicious  use  by  these  servants."  It  is  to  be 
observed  that  the  master  must  have  entrusted  the  danger- 
ous instrumentality  to  the  servant.  If  a  servant  takes 
possession  and  uses  it  without  authority  the  master  is  not 
liable  (13).  Just  what  is  included  within  dangerous  in- 
strumentalities is  not  yet  clearly  settled  by  any  weight  of 
authority.  In  a  case  which  held  a  railway  bicycle  to  be 
such  an  instrumentality,  the  test  laid  down  was  "whether 
the  appliance  the  control  and  custody  of  which  he  com- 
mitted to  his  servant's  judgment  and  discretion  was  dan- 
gerous in  itself  or  liable  to  inflict  serious  injuries  to  others 
when  operated  in  the  customary  method  of  use,  and 
while  being  devoted  to  the  purpose  for  which  it  was  de- 
signed" (14). 

§  97.    Same:     Application  of  doctrine  to  frauds  of 


(13)  Sullivan  v.  L.  &  N.  Ry.,  115  Ky.  447. 

(14)  Barmore  v.  Vicksburg  Ry.  Co.,  85  Miss.  426. 


304  AGENCY 

agent.  The  reason  for  the  extension  of  the  rule  of  lia- 
bility in  the  case  of  dangerous  instrumentalities  is  clearly 
the  necessity  of  holding  those,  whose  acts  through  repre- 
sentatives are  fraught  with  unusual  possibilities  of  injury 
to  third  parties,  to  a  greater  responsibility  when  injury 
results  through  the  acts  of  their  representatives.  A  privi- 
lege so  likely  to  lead  to  dangerous  consequences  is  coupled 
with  a  heavier  liability  for  its  consequences.  A  wider  ap- 
plication of  this  doctrine  will  uphold  the  current  of  de- 
cisions making  a  principal  liable  for  frauds  committed  by 
his  agent,  even  if  not  for  the  principal 's  benefit  but  solely 
for  the  agent's,  in  all  cases  where  the  fraud  is  made  easy 
of  accomplishment  because  the  powers  entrusted  to  the 
agent  are  of  a  sort  likely  to  deceive  third  parties.  For  ex- 
ample, the  freight  agent  of  a  railway  company  in  charge 
of  the  company's  station,  with  all  its  stationery,  bill  heads 
and  forms,  issued  a  bill  of  lading  for  sixty  barrels  of  beans 
to  one  W,  to  be  forwarded  to  one  C.  The  agent  had  never 
received  any  goods  from  W,  and  the  bill  was  the  result  of 
a  conspiracy  between  W  and  the  agent,  by  which  W  might 
defraud  any  one  who  would  advance  him  money  on  the  bill. 
"W  drew  a  draft  on  C  and  procured  money  on  it  from  T, 
by  transferring  to  him  the  bill  of  lading  as  security.  It 
was  held  that  the  railway  company  was  liable  to  T  for  the 
fraud  of  its  agent,  to  whom  it  had  entrusted  its  bills, 
books,  and  other  indicia  of  a  power  to  bind  the  company 
(15).  Similar  decisions  have  held  a  corporation  liable  for 
losses  resulting  from  fraudulent  share  certificates  issued 
by  its  accredited  transfer  and  certificate  clerk  (16),  and  a 

(15)  Bank  of  Batavia  v.  Ry.,  106  N.  Y.  195. 

(16)  N.  Y.  N.  H.  &  H.  Ry.  v.  Schuyler,  34  N.  Y.  30. 


BETWEEN  PRINCIPAL  AND  THIRD  PARTY      305 

telegraph  company  for  a  fraudulent  telegram  for  money 
issued  by  its  agent  authorized  to  accept  and  transmit  tele- 
grams (17).  This  exceptional  holding  of  the  principal 
liable,  where  the  act  of  the  agent  is  not  for  the  principal's 
benefit  but  is  made  possible  by  the  principal's  having  en- 
trusted to  the  agent  a  power  peculiarly  liable  to  a  misuse 
of  a  sort  dangerous  to  the  business  community,  has  not 
met  with  universal  approval.  Fraud,  to  make  the  prin- 
cipal liable,  must  be  for  his  benefit,  in  England  and  in 
some  courts  of  the  United  States  (18). 

§  98.  Exception  in  case  of  public  agencies.  The  doc- 
trines of  the  principal's  liability  for  the  torts  of  his  agents 
do  not  apply  to  public  agencies— the  state,  municipal  cor- 
porations in  their  governmental  capacity,  and  public  offi- 
cers generally.  Obvious  reasons  of  public  policy  explain 
this  exception.  So  also  a  public  charity  is,  by  the  weight 
of  American  authority,  held  not  to  be  responsible  for  the 
torts  of  its  servants,  though  it  is  responsible  if  it  does  not 
use  due  care  to  provide  proper  facilities  for  the  perform- 
ance of  its  public  duties.  Thus  a  charitable  hospital  is  not 
liable  for  injury  to  a  patient  from  negligent  treatment  giv- 
en him  by  the  physicians  and  nurses  it  employed,  when 
it  had  exercised  due  care  in  their  selection  (19). 

§  99.  Master  not  liable  for  acts  of  independent  con- 
tractor. To  fix  liability  on  a  principal  for  the  torts  of  one 
who  is  executing  his  will,  it  is  necessary  to  show  that  the 
wrongdoer  is  in  fact  the  principal's  agent  or  servant.    If 


(17)  Bank  of  Palo  Alto  v.  Pacific  Cable  Co.,  103  Fed.  Rep.  841. 

(18)  Friedlander  v.  Texas  P.  Ry.  Co.,  130  U.  S.  416. 

(19)  Hearn  v.  Waterbury  Hospital,  66  Conn.  98. 


'306  AGENCY 

I  procure  a  contractor  to  build  a  house  for  me  according 
to  plans  and  specifications  I  furnish  him,  I  am  not  ordi- 
narily liable  for  his  torts  or  those  of  his  servants,  for  tha 
contractor  is  not  my  servant.  He  is  not  under  my  direc- 
tion or  control  as  to  the  details  of  his  work.  His  contract 
binds  him  to  present  me  with  a  finished  product.  Except 
so  far  as  stipulated  in  the  contract,  I  retain  no  power  to 
direct  or  control  his  methods  of  achieving  the  prescribed 
result  he  has  contracted  to  furnish  me — the  completed 
building.  The  difference  between  the  servant  and  the  in- 
dependent contractor  lies  in  the  power  the  master  has  to 
direct  and  control  the  details  of  the  servant's  work  (20). 
It  is  immaterial  whether  he  does  in  fact  exercise  this 
power;  so  long  as  the  relation  created  permits  him  to  do 
so  the  representative  is  his  servant.  The  master  is  not 
liable  for  the  acts  of  an  independent  contractor  unless  he 
is  under  statutory  or  contractual  liability  to  insure  the 
safe  execution  of  the  work  (21),  or  unless  the  act  itself 
contracted  for  is  wrongful,  in  which  case  he  is  practically 
a  joint  wrongdoer  with  the  contractor  who  carries  out  his 
will  (22). 

§  100.  Master  not  liable  for  torts  of  servant  tempo- 
rarily transferred  to  another  master.  If  M  lends  or  leases 
to  N  the  services  of  S,  a  servant  whom  M  hires,  and  during 
the  course  of  S's  work  for  N,  S  injures  T,  M's  liability 
depends  on  the  nature  of  the  arrangement  between  him 
and  N  as  to  who  shall  have  control  of  S  while  he  is  work- 


(20)  See  Lawrence  v.  Shipman,  39  Conn.  586. 

(21)  Smith  V.  Milwaukee  Exchange,  91  Wis.  360. 

(22)  Ellis  V.  Sheffield  Co.,  2  E.  &  B.  767. 


BETWEEN  PRINCIPAL  AND  THIRD  PARTY      307 

ing  at  N's  work.    If  S  is  to  obey  N's  directions  as  to  how 
the  work  is  to  be  performed,  and  in  general  to  be  con- 
trolled as  to  his  conduct  by  N,  then  N  is  responsible  for 
any  tort  which  would  make  a  master  liable  (23).    But  if 
the  arrangement  is  such  that  M  is  an  independent  con- 
tractor, sending  his  servant  S  to  carry  out  his  contract, 
and  N  's  power  to  direct  S  is  confined  to  showing  him  the 
work  to  be  done,  then  M  is  still  responsible  for  S's 
torts  (24).    If,  finally,  M  retains  control  as  to  some  acts 
and  N  as  to  others,  the  master  as  to  the  act  in  the  course 
of  which  the  tort  was  committed  will  be  liable.  Thus  M,  a 
general  contractor,  leased  a  number  of  teams  with  their 
drivers  to  the  city  of  Q  for  work  on  a  street  Q  was  paving. 
M's  drivers  had  as  one  of  their  duties  to  attend  to  the 
shoeing  of  their  teams.    S  let  the  shoes  on  his  team  get 
loose,  and  a  horse  kicked  a  shoe  through  T's  window.    T 
was  allowed  a  recovery  against  M,  in  whose  service  S  had 
been  negligent  (25).    Had  S  dumped  a  load  of  stone  into 
T  's  window  Q  would  have  been  liable. 

§  101.  Master  not  liable  for  torts  of  an  interloper.  "We 
have  seen  that  the  master  may  be  made  liable  by  the  tort 
of  one  who  without  his  request  but  with  his  assent,  ex- 
press or  implied,  engages  in  his  service.  See  §  18,  above. 
But  if  for  his  own  ends  or  those  of  a  third  party,  and  with- 
out the  master's  authorization,  he  undertakes  to  render 
him  service,  he  is  a  mere  interloper  and  his  acts  impose 
no  liability  on  the  master  (26). 

(23)  Rourke  v.  Colliery  Co.,  2  C.  P.  D.  205.    See  §  71. 

(24)  Wood  V.  Cobb,  13  Allen  58. 

(25)  Huff  V.  Ford,  126  Mass.  24. 

(26)  See  Haluptzok  v.  G.  N.  R.,  55  Minn.  446. 


CHAPTER  VII. 
PRINCIPAL'S  RESPONSIBILITY  FOR  CRIMES  OP  AGENT. 

§  102.  Civil  liability.  As  crimes  are  also  private 
wrongs,  the  civil  liability  of  a  principal  for  the  crimes  of 
his  agent  or  servant  is  governed  by  the  rules  laid  down 
for  tort  liability.  In  addition  to  the  torts  at  common  law, 
for  which  the  master  is  liable  in  damages,  statutes  have 
enlarged  the  field  of  tort  liability  and  aflfixed  penalties, 
recoverable  by  the  party  injured,  to  these  statutory 
torts.  In  such  a  case  the  penalty  is  recoverable  froni 
the  master,  if  the  wrong  done  by  the  servant  is  within  the 
rule  making  the  master  liable  in  tort.  Thus  where  a 
Wisconsin  statute  prohibited  a  denial  to  citizens  of  equal 
rights  to  the  accommodations  of  public  restaurants  under 
penalty  of  fine,  a  restaurant  keeper  was  fined  for  a  re- 
fusal by  his  waiters  to  serve  a  colored  man  (1). 

§  103.  Criminal  liability:  In  general  liable  only  for 
authorized  acts.  To  hold  a  principal  responsible  for  the 
torts  of  his  agent  is  quite  different  from  holding  him 
morally  guilty.  Responsibility  is  consistent  with  entire 
ignorance  and  innocence  of  the  agent's  act  or  vigorous 
disapproval  of  it.  But  in  criminal  liability  a  particular 
state  of  mind  is  generally  an  essential  element.  Hence  a 
principal  is  not  criminally  liable  for  the  acts  of  his  agent 


(1)     Bryan  v.  Adler,  97  Wis.  124. 

308 


BETWEEJJ  PRINCIPAL  AND  THIRD  PARTY      309 

unless  he  can  be  shown  either  to  have  authorized  them, 
assented  to  them,  or  been  so  negligent  in  controlling  Ms 
agent  that  the  act  may  be  said  to  result  from  his  criminal 
negligence. 

§  104.  Same:  Exceptions.  There  are,  however,  cer- 
tain statutory  crimes  which  form  an  exception  to  this  gen- 
eral rule.  As  the  court  said  in  the  case  of  People  v.  Roby 
(2) :  "As  a  fule  there  can  be  no  crime  without  a  criminal 
intent,  but  this  is  by  no  means  a  universal  rule ....  Many 
statutes  which  are  in  their  nature  police  regulations .... 
impose  criminal  penalties  irrespective  of  any  intent  to 
violate  them,  the  purpose  being  to  require  a  degree  of 
diligence  for  the  protection  of  the  public  which  shall  ren- 
der violation  impossible."  This  case  was  one  in  which  a 
clerk  of  the  owner  opened  a  saloon  on  Sunday  and  sold 
a  drink,  thus  violating  a  Sunday  closing  statute.  The 
court  interpreted  the  statute  as  making  it  the  principal's 
duty  to  see  that  the  prohibited  acts  were  not  committed, 
whether  by  the  principal  himself  or  by  any  of  his  agents 
or  servants.  The  statutes  most  frequently  interpreted 
thus  are  regulations  under  the  so-called  "police  power," 
as  the  sale  of  foods  and  liquors,  Sunday  observance,  etc. 


(2)     52     Mich.   577 


VoL  1—25 


CHAPTER  VIII. 

PRINCIPAL'S  RESPONSIBILITY  FOR  CONTRACTS  MADE  ON 
HIS  BEHALF  BY  AGENT. 

§  105.  Division  of  subject.  The  characteristic  func- 
tion of  an  agent  is  to  make  contracts  for  his  principal.  In 
most  cases  in  making  these  contracts  he  discloses  who  his 
principal  is,  but  circumstances  not  infrequently  arise 
where  business  reasons  make  a  contrary  practice  desir- 
able. The  legal  difference  between  contracts  for  a  dis- 
closed and  those  made  for  an  undisclosed  principal  sug- 
gests a  separate  treatment  of  the  two. 

Section  1.    Conteacts  Made  for  a  Disclosed  Pkincipal. 

§  106.  General  rule.  A  principal  is  bound  to  third 
parties  by  any  contract  made  by  his  agent  within  the  scope 
of  the  agent's  authority.  He  is  not  bound  by  any  contract 
made  outside  the  agent's  authority,  and  the  duty  of  as- 
certaining the  extent  and  limits  of  the  authority  is  laid 
strictly  on  the  third  party  who  deals  with  the  agent. 

§107.  Extent  of  agent's  authority.  The  agent's  au- 
thority to  bind  his  principal  by  a  contract  includes:  (1) 
authority  actually  conferred  on  him  by  his  principal 's  in- 
structions, either  explicitly  or  by  necessary  implication ; 
(2)  authority  incidental  to  agencies  of  the  sort  to  which 
the  agent  is  appointed,  and  under  the  circumstances  of 
his  appointment  and  his  field  and  method  of  operation; 

310 


BETWEEN  PRINCIPAL  AND  THIRD  PARTY      311 

(3)  authority  apparently  conferred  by  the  conduct  of  the 
principal. 

§  108.  Authority  actually  conferred  binds  the  princi- 
pal. Within  the  authority  which  the  principal  has  ex- 
pressly conferred  on  the  agent,  any  act  of  the  agent  is 
in  legal  effect  the  act  of  the  principal.  The  relation  of 
agency  has  been  created  for  the  very  purpose  of  having 
these  acts  done.  The  authority  actually  conferred  in- 
cludes also  the  authority  which  by  necessary  implication  is 
involved  in  the  express  authority.  So  an  agent  explicitly 
authorized  to  deliver  all  the  freight  of  a  railroad  in  Chi- 
cago was  held  to  have  implicit  authority  to  make  terms 
in  regard  to  its  delivery,  and  the  railroad  was  held  liable 
on  the  contract  he  had  made  on  its  behalf  to  deliver  cer- 
tain parcels  at  a  certain  address  within  the  city  (1). 

§  109.  Forms  of  conferring  express  authority  and  their 
construction.  The  express  authority  may  be  conferred  in 
a  variety  of  forms,  from  the  formal  instrument  under 
seal,  the  power  of  attorney,  through  instruments  not  un- 
der seal  of  varying  degrees  of  explicitness,  contracts  of 
agency,  mere  notifications  of  appointment,  and  so  forth, 
to  a  mere  oral  direction.  In  ascertaining  the  extent  of 
the  authority  conferred  by  these  different  methods,  the 
courts  construe  the  more  formal  more  strictly  against 
extended  powers.  The  third  party,  in  determining  the 
extent  to  which  he  is  justified  in  relying  on  the  agent's 
authority,  is  held  to  a  careful  examination  of  the  formal 
power  and  a  reasonable  interpretation  of  any  general 
language  in  it.    Thus  a  power  of  attorney  authorizing 


(1)     Mich.  So.  Ry.  Co.  v.  Day,  20  111.  375. 


312  AGENCY 

an  agent  generally  to  issue  notes  in  the  name  of  his 
principal  will  be  construed  to  extend  only  to  notes  issued 
in  the  course  of  the  principal's  business  and  for  his  bene- 
fit (2).  An  explicit  definition  of  the  extent  of  the  agent's 
authority  in  writing  is  the  best  safe-guard  of  the  prin- 
cipal from  liability  on  contracts  made  by  the  agent. 

§  110.  Incidental  authority:  In  general.  In  addition 
to  the  actual  authority  conferred  by  the  principal's  in- 
structions, the  agent  in  his  dealings  with  third  parties 
who  do  not  know  the  content  of  these  instructions  is 
clothed  with  incidental  authority  arising  out  of  the  na- 
ture and  circumstances  of  the  agency.  For  instance, 
when  a  man  engages  the  services  of  a  factor  he  is  bound, 
so  far  as  third  parties  are  concerned,  by  the  factor's  ex- 
ercise of  any  of  the  powers  which  business  custom  has 
conferred  on  agents  in  this  occupation.  Thus  a  factor 
whom  the  principal  has  authorized  to  sell  flour  on  com- 
mission may,  without  further  authorization,  warrant  that 
the  flour  is  sound  and  not  musty;  for  it  is  a  valid  busi- 
ness custom  for  factors  to  sell  flour  on  such  a  warranty 
(3).  Even  if  the  principal  had  expressly  forbidden  the 
factor  to  make  this  warranty,  if  the  factor  in  disobedi- 
ence to  his  intructions  actually  does  make  it,  the  prin- 
cipal is  still  bound  to  the  party  to  whom  the  warranty 
was  made,  unless  such  party  actually  knew  of  the  con- 
trary instruction.  It  is  a  custom  of  the  business  world, 
and  one  which  long  ago  received  legal  sanction,  that  a 
commission  merchant   may   make  usual   warranties   of 


(2)  Craighead  v.  Peterson,  72  N.  Y.  279. 

(3)  Randall  v.  Kehlor,  60  Me.  37. 


BETWEEN  PRINCIPAL  AND  THIRD  PARTY      313 

quality  concerning  goods  entrusted  to  him  for  sale,  and 
no  instruction  given  him  by  his  principal  unknown  to  the 
third  party  who  deals  with  him,  will  free  the  principal 
from  the  burden  of  this  authority,  conferred  as  a  usual 
incident  of  an  appointment  to  act  as  factor.  About  a  large 
number  of  professional  agencies,  for  instance  the  voca- 
tions of  auctioneer,  broker,  attorney,  and  cashier,  as  well 
as  factor,  has  grown  up  a  body  of  business  customs  which 
have  received  legal  recognition,  on  the  theory  that  when 
a  principal  appoints  a  professional  agent  he  must  intend 
him  to  exercise  such  powers,  and  in  such  manner,  as 
business  usage  has  prescribed  for  such  an  agent.  Even 
when  an  agent  is  not  by  occupation  a  member  of  one  of 
these  special  classes,  he  may  be  presumed  by  third  par- 
ties to  have  the  right  to  deal  according  to  the  customs 
governing  the  particular  sort  of  business  he  is  set  to  do, 
and  in  the  particular  place  in  which  he  is  set  to  do  it. 
So  a  commercial  traveller  for  a  Chicago  house,  carrying 
trunks  of  samples  in  the  rural  districts  of  Wisconsin, 
had,  as  an  incident  of  the  business  he  was  employed  for, 
authority  to  contract  livery  bills  on  the  credit  of  his  house 
(4).  So  also  where  a  London  merchant  made  in  Liver- 
pool a  contract  with  a  Liverpool  broker,  the  usage  of  the 
Liverpool  market  was  held  to  govern  the  broker's  au- 
thority. As  one  of  the  judges  said:  ''When  a  broker  is 
employed  in  a  particular  market,  he  is  presumed  to  be 
vested  with  authority  to  purchase  according  to  the  usage 
of  that  market"  (5). 


(4)  Bentley  v.  Doggett,  51  Wis.  224. 

(5)  Graves  v.  Legg,  2  H.  &  N.  210. 


314  AGENCY 

§  111.  Same:  Where  the  principal  instructs  against 
the  use  of  incidental  authority.  It  will  be  noted  that  the 
principal  does  not  invest  the  agent  with  this  authority 
except  in  so  far  as  silence  on  points  of  custom  or  usage 
is  tantamount  to  its  adoption  even  as  between  the  prin- 
cipal and  the  agent.  But  the  principal  may  forbid  the 
agent  to  exercise  these  incidental  powers.  Then  as  be- 
tween the  agent  and  the  principal  himself,  the  principal 
may  recover  damages  against  the  agent  for  his  disooedi- 
ence  and  its  results;  but  unless  the  third  parties  with 
whom  the  agent  deals  are  aware,  either  through  informa- 
tion from  the  principal,  or  in  any  other  way,  that  the 
agent  has  not  in  fact  the  authority  usually  incident  to 
such  agency  as  he  exercises,  the  principal  will  be  bound 
by  the  forbidden  contract.  Thus  in  the  case  of  the  com- 
mercial traveller  discussed  above,  the  traveller  had  been 
provided  by  his  firm  with  money  with  which  to  hire  liv- 
ery horses,  and  forbidden  to  run  bills,  but  when  he  diso- 
bediently did  hire  a  horse  and  wagon  from  T,  who  did 
not  know  of  his  instructions,  T  was  allowed  to  recover 
from  the  firm.  The  principal  cannot  by  instructions  to 
the  agent,  of  which  the  third  party  who  contracts  with 
the  agent  is  ignorant,  limit  the  authority  the  agent  has 
as  incident  to  the  nature  of  his  agency. 

§  112.  Same:  Illustrations  of  authority  incident  to  the 
nature  of  the  agency.  The  extent  of  the  incidental  au- 
thority of  an  agent  depends  so  much  on  the  variable  ele- 
ments of  custom  and  business  usage  in  different  employ- 
ments, different  markets,  and  different  business  commun- 
ities, that  any  complete  definition  of  it  is  quite  impossible. 
Some  illustrations  may,  however,  be  considered. 


BETWEEN  PRINCIPAL  AND  THIRD  PARTY      315 

§  113.  Same:  Agents  to  seU.  An  agent  to  sell  prop- 
erty of  any  kind  must  sell  for  a  money  consideration,  and 
cannot  without  special  authorization  bind  his  principal 
by  taking  in  payment  notes  or  other  commercial  paper 
(6).  He  cannot  make  exchange  for  other  property.  He 
cannot  transfer  to  pay  or  secure  the  principal's  debts  or 
his  own  debts  (7).  An  agent  to  sell  real  estate  must  usu- 
ally be  appointed  in  writing,  in  many  jurisdictions  by  a 
power  of  attorney  under  seal,  and  his  authority,  as  is 
usual  in  the  case  of  written  appointments,  is  strictly  con- 
strued; so  he  must  sell  on  the  terms  his  principal  directs, 
and  a  sale  on  others,  even  if  better  for  the  principal,  will 
not  bind  him  (8).  But  his  power  to  sell  gives  him  power 
to  execute  conveyances,  and  in  the  majority  of  American 
jurisdictions  to  make  a  covenant  of  general  warranty  (9). 
An  agent  to  sell  personalty  may  usually  make  warranties 
of  the  quality  of  the  goods,  may  receive  payment  if  he  has 
possession  of  the  goods,  but  may  not  if  he  sells  for  future 
delivery.  So  in  general  a  travelling  salesman  selling 
goods  by  sample,  or  merely  soliciting  orders,  has  no  inci- 
dental authority  to  receive  payment  therefor  (10). 

§  114.  Same:  Agents  to  purchase.  An  agent  to  pur- 
chase, unless  some  special  trade  or  local  custom  warrants 
it,  may  not  purchase  on  credit  if  he  is  furnished  with 
funds  (11).    If  he  is  not  given  funds  but  yet  ordered  to 


(6)  Buckwalter  v.  Craig,  55  Mo.  71. 

(7)  Stewart  v.  Woodward,  50  Vt.  78. 

(8)  Dayton  v.  Buford,  18  Minn.  111. 

(9)  LeRoy  v.  Beard,  8  How.  451. 

(10)  Butler  v.  Dorman,  68  Mo.  298. 

(11)  Wheeler  v.  MoGuire,  86  Ala.  398. 


316  AGENCY 

buy,  lie  may  buy  on  credit  (12),  but  usually  cannot  bind 
his  principal  by  a  promissory  note.  He  must  observe  his 
instructions  as  to  the  quantity  and  kind  of  goods  he  buys, 
and  if  so  directed  by  his  master  must  buy  from  a  person" 
selected  by  the  master  (13).  He  has  incidental  authority 
to  fix  the  terms  of  the  transaction  (14),  and  may  arrange 
for  shipment  and  delivery  of  the  goods. 

§  115.  Same:  Agents  to  manage  a  business  or  prop- 
erty. A  managing  agent  has  the  powers  necessary  to  the 
efficient  control  of  the  business,  that  is,  power  to  do  all 
that  is  ordinarily  done  in  the  operation  of  a  business  of 
this  particular  sort  (15).  But  he  has  not  power  to  change 
the  nature  of  the  business  or  dispose  of  it ;  and  his  power 
to  make  negotiable  paper  and  to  borrow  money  is  very 
narrowly  limited  (16). 

§  116.  Same:  Factors.  Any  full  consideration  of  the 
various  agency  occupations  is  beyond  the  scope  of  this 
article,  but  a  brief  enumeration  of  some  of  the  main  dis- 
tinguishing powers  of  the  principal  forms  may  be  made. 
A  factor  or  commission  merchant  is  a  professional  agent 
whose  business  is  the  selling  of  goods  on  commission.  It 
is  a  business  with  a  large  body  of  attached  business  cus- 
tom which  gives  a  factor  large  incidental  powers.  He  has 
possession  of  the  goods  he  deals  with,  and  sells  in  his  own 
name,  so  that  innocent  purchasers  from  him  are  in  no  po- 
sition to  know  whose  goods  he  is  selling  or  what  instruc- 


(12)  Brittan  v.  Westall,  137  N.  C.  30. 

(13)  Peckham  v.  Lyon,  4  McLean  45. 

(14)  Owen  v.  Brockschmidt,  54  Mo.  285. 

(15)  Edmunds  v.  Bushell,  L.  R.  1  Q.  B.  97. 

(16)  Temple  v.  Pomroy,  4  Gray  128. 


BETWEEN  PRINCIPAL  AND  THIRD  PARTY      317 

tions  he  has  from  their  owner.  Hence  for  the  protection 
of  his  customers  the  factor  has  been  allowed  by  law,  both 
common  and  statutory,  large  authority  to  bind  his  prin- 
cipal to  third  parties  by  his  contracts.  He  may  sell  in  his 
own  name,  either  for  cash  or  credit  (17) ;  may  receive  pay- 
ment in  cash  or  negotiable  paper  (18);  and  may  fix  the 
terms  of  his  sale  as  to  time  and  prices  (19).  But  at  com- 
mon law  he  has  power  only  to  sell;  he  cannot,  except 
where  he  has  made  advances  on  the  goods,  either  barter 
or  pledge  them  (20).  This  is  likely  to  prove  a  hardship 
on  persons  dealing  with  factors,  especially  as  the  latter 
are  not  infrequently  dealers  on  their  account  as  well  as 
for  others.  They  may  have  in  their  possession  goods 
partly  those  of  others  and  partly  their  own,  all  salable  in 
their  own  name  and  on  their  own  terms.  Their  own  goods 
they  can  barter  or  pledge  for  their  debts.  An  innocent 
third  party  dealing  with  them  may  get  goods  which  they 
profess  to  own  but  which  are  in  reality  goods  of  a  princi- 
pal consigned  to  the  factor  for  sale.  For  the  protection 
of  people  thus  dealing  with  factors  a  number  of  states 
have  passed  factoids'  acts,  with  provisions  designed  to  pre- 
vent frauds  on  innocent  purchasers.  Thus  the  New  York 
act,  the  earliest  American  statute,  provides :  * '  Every  fac- 
tor or  other  agent  entrusted  with  the  possession  of  any 
bill  of  lading,  custom-house  permit,  or  warehouse-keep- 
er's receipt  for  the  delivery  of  any  such  merchandise,  and 
every  factor  or  agent  not  having  the  documentary  evi- 


(17)  Goodenow  v.  Tyler,  7  Mass.  36. 

(18)  Pickering  v.  Busk,  15  East  38. 

(19)  Smart  v.  Sandars,  3  C.  B.  380. 

(20)  Warner  v.  Martin,  U  How.  209. 


318  AGENCY 

dence  of  title  who  shall  be  entrusted  with  the  possession 
of  any  merchandise  for  the  purpose  of  sale,  or  as  security 
for  any  advances  to  be  made  or  obtained  thereon,  shall  be 
deemed  to  be  the  true  owner  thereof,  so  far  as  to  give 
validity  to  any  contract  made  by  any  such  agent  with  any 
other  person,  for  the  sale  or  disposition  of  the  whole  or 
any  part  of  such  merchandise,  for  any  money  advanced, 
or  negotiable  obligation  in  writing  given  by  such  other 
person  upon  the  faith  thereof."  The  party  taking  the 
goods  is  not  made  the  owner,  but  the  true  owner,  in  order 
to  reclaim,  must  repay  any  advances  the  third  party  has 
made  on  the  goods.  See  Sales,  ^>^  75,  81,  in  \'ohiinc  Til  of 
this  work. 

§  117.  Same:  Brokers.  A  broker  is  an  agent  whose 
business  is  the  negotiating,  usually  for  others  and  upon  a 
commission,  of  purchases  or  sales  of  goods — real  prop- 
erty, stocks,  commercial  paper,  and  other  merchantable 
commodities.  Strictly  speaking,  the  word  broker  is  ap- 
plicable only  to  middlemen  who  bring  together  the  princi- 
pals for  a  contemplated  transaction  and  have  nothing 
further  to  do  with  the  contract  itself.  A  broker  as  dis- 
tinguished from  a  factor  does  not  normally  have  posses- 
sion of  the  articles  he  deals  in.  For  these  reasons  his  inci- 
dental authority  is  much  more  restricted  than  that  of  a 
factor.  In  the  case,  however,  of  brokers  dealing  in  shares 
on  a  stock  exchange,  the  customs  of  the  exchange  may 
very  gi*eatly  enlarge  the  usual  broker's  authority.  Each 
exchange  has  its  own  rules,  and,  as  we  have  seen,  a  princi- 
pal acting  through  a  broker  in  a  given  market  is  bound 
by  any  custom  of  that  market  that  is  reasonably  con- 
sistent with  the  existence  of  an  agency  relation.    It  is  im- 


BETWEEN  PRINCIPAL  AND  THIRD  PARTY      319 

material  in  such  a  case  that  the  principal  did  not  know 
of  it  (21).  Brokers  in  general,  in  contracting  for  a  princi- 
pal with  third  parties,  have  power  incidental  to  their 
business  to  fix  teims  and  prices  (22).  But  they  cannot 
receive  payment,  nor  in  the  absence  of  a  special  custom 
or  express  authority  make  a  warranty  as  to  the  subject 
matter  they  deal  in,  give  credit  to  a  buyer,  or  act  through 
a  substitute  (23).  They  must  act  in  the  name  of  their 
principal. 

§  118.  Same:  Auctioneers.  An  auctioneer  is  a  pro- 
fessional agent  whose  business  it  is  to  sell  at  public  sale  to 
the  highest  bidder.  He  has  incidental  power  to  prescribe 
the  terms  and  conditions  of  sale  (24).  He  can  receive  the 
purchase  price  of  personal  property  which  he  has  been 
given  authority  to  sell,  but  if  he  sells  real  property  he  is 
not  entitled  to  receive  the  price  unless  the  published 
terms  of  sale  prescribe  that  a  payment,  for  example  a  de- 
posit, is  to  be  made  at  the  time  of  sale.  This  he  has  a 
right  to  receive.  Without  special  authority  he  cannot  sell 
on  credit,  nor  at  a  private  sale,  nor  with  warranties  which 
will  bind  the  principal,  nor  through  a  substitute  (25). 
He  cannot  make  any  binding  representations  as  to  the 
subject  matter  of  his  agency  which  vary  the  advertised 
description  (26),  but  he  may  make  such  as  are  merely  ex- 
planatory of  it. 


(21)  Van  Dusen  Co.  v.  Jungeblut,  75  Minn.  298. 

(22)  Daylight  Burner  Co.  v.  Odlin,  51  N.  H.  56. 

(23)  Higgins  v.  Moore,  34  N.  Y.  417;  Dodd  v.  Farlow,  11  Allen  426. 

(24)  Bush  V.  Cole,  28  N.  Y.  261. 

(25)  Williams   v.    Millington,    1    H.    Bl.   81;    Blood   v.    French,    9 
Gray.  197. 

(26)  Poree  v.  Bonneval,  7  La.  386. 


320  AGENCY 

§  119.  Same:  Attorneys  at  law.  An  attorney  at  law 
in  his  relation  to  his  client  is  an  agent  whose  business  it 
is  to  prepare  and  try  cases  and  to  give  advice  on  legal 
matters.  In  the  ease  of  Moulton  v.  Bowker  (27),  his  au- 
thority is  thus  described:  *'An  attorney  at  law  has  au- 
thority, by  virtue  of  his  employment  as  such,  to  do  on  be- 
half of  his  clients  all  acts,  in  or  out  of  court,  necessary  or 
incidental  to  the  prosecution  and  management  of  the  suit, 
and  which  affect  the  remedy  only,  and  not  the  cause  of 
the  action."  This  indicates  that  an  attorney  has  large 
incidental  powers,  and  for  obvious  reasons.  As  the  court 
said  in  a  Mississippi  case:  "To  impose  on  the  attorney 
the  necessity  of  consulting  his  client  whenever  proposi- 
tions are  made  to  him  in  regard  to  those  matters  which  in 
his  judgment  are  advantageous,  would  so  embarrass  and 
thwart  him  as  in  a  great  measure  to  destroy  his  useful- 
ness,* hence  it  is  that  the  courts  quite  generally  concede 
to  the  attorney  unlimited  authority  over  the  conduct  of 
the  litigation,  including  the  power  to  control  all  legal  pro- 
cess, and  to  compromise  or  release  all  attachment  or  other 
liens  which  have  accrued  in  the  progress  of  the  cause,  as 
collateral  thereto,  and  not  belonging  to  the  original  de- 
mand'' (28).  The  applications  of  these  principles  are  too 
numerous  for  more  than  mere  illustration.  An  attorney 
may  serve  or  accept  service  of  all  necessary  papers  dur- 
ing the  progress  of  the  cause  (29);  he  may  get*  briefs 
printed  at  his  client's  expense;  he  may  release  an  attach- 


(27)  115  Mass.  36. 

(28)  Levy  v.  Brown,  56  Miss.  89. 

(29)  Com.  V.  Schooley,  5  Kulp.  53. 


BETWEEN  PRINCIPAL  AND  THIRD  PARTY      321 

ment  before  judgment,  or  direct  a  levy  to  collect  a  claim. 
On  the  other  hand  he  has  no  incidental  power  to  confess 
judgment,  or  in  general  "compromise  the  rights  of  his 
client  outside  of  his  conduct  of  the  action,  or  accept  less 
than  the  full  satisfaction  sought,  or  subject  him  to  a  new 
cause  of  action"  (30). 

§  120.  Authority  by  estoppel.  If  a  principal  so  con- 
ducts himself  as  to  lead  a  third  party  to  believe  that  the 
agent  is  his  agent,  the  principal  will  be  held  to  the  same 
liability  on  a  contract  made  by  the  third  party  with  the 
agent,  in  bona  fide  reliance  on  the  principal's  conduct,  as 
if  the  agent  were  actually  the  principal's  agent.  Thus  in 
the  early  case  of  Hazard  v.  Treadwell  (31),  P  was  an 
ironmonger  who  sent  A,  a  waterman,  to  T  to  buy  iron  on 
credit,  and  paid  for  it  afterwards.  He  sent  A  a  second 
time  with  ready  money,  and  T  gave  A  the  iron  as  before, 
but  A  did  not  pay  over  the  money.  When  T  attempted  to 
collect  from  P,  P  denied  that  A  had  authority  to  buy  on 
credit.  T  sued  P  and  was  allowed  to  recover,  on  the 
ground  that  P's  conduct  in  sending  A  the  first  time  with 
authority  to  buy  on  credit,  and  then  sending  him  a  second 
time  without  notice  to  T  that  A's  authority  was  this  time 
less,  made  P  liable  on  the  second  contract. 

§  121.  Same:  Distinguished  from  incidental  author- 
ity. Authority  by  estoppel  should  be  distinguished  from 
incidental  authority.  Incidental  authority  is  actual  au- 
thority. Even  if  the  principal  in  his  instructions  to  the 
agent  has  forbidden  him  to  exercise  it,  still  it  is  a  part  of 


(30)  Pfister  v.  Wade,  69  Cal.  133;  Lewis  .v.  Duane,  141  N.  Y.  302. 

(31)  Hazard  v.  Treadwell,  1  Str.  560. 


322  AGENCY 

the  authority  conferred  when  the  principal  made  the 
agent  his  agent  to  do  a  particuhir  kind  of  service;  and 
unless  the  third  party  knew  of  the  principal's  prohibition 
it  is  authority  enough  to  entitle  him  to  enforce  a  contract 
made  under  it.  To  recover  from  the  principal  on  a  con- 
tract made  with  an  agent,  a  third  party  has  either  to  show 
that  the  agent  actually  had  authority,  or  that  the  princi- 
pal is  estopped  to  dispute  that  the  agent  had  it.  A  princi- 
pal is  estopped  only  when  the  third  party  has  in  good 
faith  so  relied  on  the  principal's  conduct  as  to  change  his 
legal  position  to  his  detriment.  He  must  then,  in  order  to 
hold  the  principal  on  this  so-called  authority  by  estoppel, 
himself  show  a  reasonable  reliance  in  good  faith  on  the 
conduct  of  the  principal.  But  to  recover  on  the  ground 
of  the  agent's  incidental  authority,  the  third  party  need 
merely  show  the  existence  of  such  an  authority  in  an 
agency  of  this  sort,  and  unless  the  principal  can  show 
that  in  the  particular  case  the  third  party  knew  or  was 
put  on  notice  of  a  special  limit,  within  the  lines  of  the 
authority  usual  in  such  an  agency,  the  principal  will  be 
bound  by  the  agent's  contract. 

§  122.  Limits  of  principal's  liability.  Not  every  con- 
tract made  by  the  professed  agent  of  a  principal,  how- 
ever, makes  the  principal  liable.  Third  parties  can  hold 
the  principal  only  where  the  agent  had  authority,  or 
where  the  principal's  conduct,  reasonably  and  honestly 
interpreted,  misled  them  into  dealing  with  a  professing 
agent  as  if  he  had  authority.  In  every  case,  the  third 
parties  who  deal  with  an  agent  instead  of  directly  with  a 
principal  do  so  at  their  own  risk  of  being  mistaken  as  to 


BETWEEN  PRINCIPAL  AND  THIRD  PARTY      323 

the  agent's  powers.  The  law  imposes  on  them  the  duty  of 
making  proper  and  diligent  inquiry  as  to  the  actual  ex- 
istence and  extent  of  the  agent's  authority,  and  they 
have  no  right  to  rely  on  any  statements  the  agent  himself 
makes  about  it.  In  the  case  of  Martin  v.  Great  Falls 
Manufacturing  Co.  (32),  A  was  an  under  bookkeeper  in 
the  cotton  factory  of  the  P  Company,  which  employed 
also  a  head  bookkeeper  and  a  general  manager.  A  came 
to  T,  who  knew  his  position  in  the  P  Company 's  staff,  and 
represented  that  he  wished  to  borrow  $150  for  the  com- 
pany, which,  he  said,  had  some  settlements  to  make.  T 
gave  him  the  money,  and  received  in  return  a  memoran- 
dum as  follows:  ''Borrowed  of  T  for  Co.  $150.  A."  A 
absconded  with  the  money,  and  T  sued  the  company  for 
the  payment.  It  was  held  that  T  could  not  recover  from 
the  company  on  the  memorandum;  he  had  no  right  to  rely 
on  A's  representation  as  to  his  authority,  and  A's  posi- 
tion with  the  company  did  not  clothe  him  with  incidental 
authority  to  borrow  for  it. 

§  123.  Exceptions  to  the  rule  of  principal's  liability. 
Two  exceptions  are  to  be  noticed  to  the  limits  of  the  prin- 
cipal 's  liability  for  contracts  made  by  his  agents.  If  the 
principal  entrusts  negotiable  paper  to  his  agent  he  is 
bound  by  the  agent 's  dealing  concerning  it  with  purchas- 
ers in  good  faith  or  pledgees  for  valuable  consideration 
and  without  notice.  This  is  due  to  the  legal  rules  govern- 
ing negotiable  paper  (33).  In  the  second  place,  in  the 
jurisdictions  under  factors '  acts,  the  same  rule  of  liability 

(32)  Martin  v.  Great  Falls  Mfg.  Co.,  9  N.  H.  51. 

(33)  See  the  article  on  Negotiable  Instruments  in  Volume  VII  of 
this  work. 


324  AGENCY 

obtains  where  a  principal  has  entrusted  goods  to  a  factor. 
See  §  116,  above. 

Section  2.    Contracts  Made  on  Behalf  of  an  Undis- 
closed Principal. 

§  124.  In  general.  As  has  already  been  remarked,  cir- 
cumstances not  infrequently  arise  which  make  it  desir- 
able or  convenient  for  business  reasons  that  an  agent  deal 
with  third  parties  in  his  own  name  rather  than  his  princi- 
pal's,  and  without  disclosing  the  fact  that  he  is  acting  for 
a  principal.  For  instance,  if  a  manufacturing  company 
is  seeking  to  acquire  a  considerable  tract  of  land  for  a 
factory  site  it  will  obviously  be  expedient  for  the  com- 
pany to  buy  the  lots  from  the  individual  owners  in  its 
agent's  name,  rather  than  its  own.  Factors  generally 
deal  in  their  own  name,  and  the  practice  is  not  uncommon 
in  many  sorts  of  agency.  The  agent  may  disclose  the 
fact  that  he  has  a  principal  but  conceal  the  principaPs 
identity,  or  he  may  keep  undisclosed  the  existence  as  well 
as  the  identity  of  the  principal. 

§  125.  Liability  of  undisclosed  principal  for  contracts 
made  by  his  agent.  It  is  obvious  that  in  cases  where 
even  the  principal's  existence  is  not  known  to  the  third 
party  the  contract  is  made  between  the  third  party  and 
the  agent,  while  the  third  party  relies  solely  on  the  credit, 
character,  and  substance  of  the  agent.  But  the  agent  has 
not  acted  on  his  own  initiative.  The  primary  responsi- 
bility for  the  transaction  is  with  the  principal,  and  the 
contract  is  after  all  with  the  principal,  "who  set  the 
whole  thing  in  motion."  Therefore  in  general,  if  the 
third  party  discovers  that  the  contract  was  made  by  the 


BETWEEN  PRINCIPAL  AND  THIRD  PARTY      325 

agent  on  behalf  of  a  principal,  he  can  hold  that  principal 
liable  on  the  contract.    Thus  in  the  case  of  Kayton  v.  Bar- 
nett  (34),  A,  who  was  secretly  acting  for  P,  sought  to  buy 
a  certain  patent  right  from  T.     T  was  very  unwilling  to 
sell  the  right  to  P,  and  suspecting  that  A  was  acting  for 
P,  he  inquired  as  to  this,  and  was  told  by  A  that  he  was 
buying  for  himself  and  not  for  P.    T  then  sold  the  patent 
to  A,  who  paid  for  it  in  part  but  died  before  completing 
the  payments.    When  T  discovered  that  A  had  been  act- 
ing for  P  he  brought  suit  against  P  for  the  balance  due 
under  the  contract,  and  was  allowed  to  recover.      The 
main  ground  for  the  decision  was  that  P  had  directed 
every  step  in  the  negotiations  carried  on  by  A.    A  was 
merely  P's  agent,  his  mind  in  the  transaction  being  P's 
mind,  so  that  the  court  found  an  actual  meeting  of  minds 
such  that  the  contract  was  really  P's  and  T's.    In  this 
particular  case  P  actually  got  the  benefit  of  the  agent's 
purchase,  but  that  fact  is  really  immaterial.     If  the  agent 
puts  the  proceeds  of  a  transaction  with  the  third  party 
in  his  pocket,  the  third  party  when  he  discovers  the  prin- 
dpal  may  recover  from  him  on  the  contract,  even  though 
the  agent  had  defrauded  the  principal  of  the  benefit  he 
sought.     The  principal  has  been  the  originating  cause 
Of  the  contract's  being  made,  and  so  of  the  third  party's 
legal  detriment.    The  liability  of  the  undisclosed  prmci- 
pal  to  third  parties  is  exactly  the  same  as  that  of  the 
disclosed  principal.    He  is  liable  for  all  acts  of  his  agent 
within  the  scope  of  the  agent's  authority  express  and 
incidental.      Even  though  the  agent  was  expressly  pro- 

(34)     116  N.  Y.  625. 

Vol  1—26 


326  AGENCY 

hibited  from  making  the  particular  contract  nnder  which 
a  third  party,  who  did  not  know  of  tlie  prohibition,  sues, 
if  such  a  contract  was  within  the  incidental  powers  of  such 
an  agent  the  undisclosed  principal  will  be  liable  on  it. 
Thus  in  the  leading  case  of  Watteau  v.  Fenwick  (35)  A 
was  the  nominal  proprietor  of  a  saloon  in  reality  owned 
by  P.  P  was  a  brewer  who  had  forbidden  A  to  get  his 
stock  anywhere  but  of  him.  The  prohibition  included 
direct  purchases  of  cigars  and  other  usual  bar  side-lines. 
A  in  disobedience  to  these  instructions  bought  cigars  from 
T,  and  also  some  goods  not  customarily  handled  in  sa- 
loons. T,  when  he  discovered  who  the  real  principal  was, 
brought  suit  against  P  for  the  price  of  all  the  goods.  He 
was  allowed  to  recover  the  price  of  the  cigars,  but  not  of 
the  other  articles.  The  purchase  of  the  cigars  was  with- 
in the  incidental  authority  which  P  gave  his  agent  when 
he  allowed  him  to  run  a  saloon  business  for  him,  even 
though  he  had  forbidden  A  to  exercise  this  part  of  his 
authority.  But  the  purchase  of  the  other  articles  was  not 
within  his  incidental  authority,  and  so  T  had  no  right  to 
seek  a  remedy  against  the  principal.  Of  course  T  had  a 
right  of  action  against  A  himself  for  these  as  well  as  the 
cigars;  and  he  could  not  complain  that  he  had  no  right 
against  anyone  else,  since  he  had  sold  the  goods  to  A  in 
sole  reliance  on  A's  character,  credit  and  substance. 

§  126.  Exceptions  to  liability  of  undisclosed  principal: 
Written  contracts.  The  doctrine  of  the  undisclosed  prin- 
cipal is  subject  to  several  exceptions.  An  undisclosed 
principal  is  not  liable  on  a  contract  under  seal  made  in 


(35)     Watteau  v.  Fenwick,  (1898)  1  Q.  B.  34C. 


BETWEEN  PRINCIPAL  AND  THIRD  PARTY      327 

the  agent's  name.     This  is  on  account  of  the  technical 
rule  of  the  common  law  with  regard  to  instruments  un- 
der seal,  that  only  the  parties  named  in  the  instrument 
can  l)e  sued  on  it  (36).     For  a  similiar  reason,  originat- 
ing in  the  law  merchant,  an  undisclosed  principal  cannot 
be  sued  on  a  negotiable    instrument    where    only    his 
agent's  name  appears;  but  the  third  party  in  this  case 
may    sue  the  principal    on    the    original    consideration, 
disregarding  the  negotiable  instrument  (37).     As  to  writ- 
ten contracts  other  than  instruments  under  seal  and  ne- 
gotiable instruments,  the  rule  of  the  principal's  liability 
applies  even  where  the  agent's  name  is  the  only  one  to 
appear  in  the  writing  (38).     The  parol  evidence  rule  is 
held  not  to  be  violated  by  adding  the  liability  of  the  un- 
disclosed principal  to  the  lial)ility  of  the  party  whose  name 
already  appears  on  the  contract— the  agent  (39). 

§  127.  Same:  State  of  accounts  between  principal  and 
agent.  Another  exception  to  the  rule  of  the  undisclosed 
principal's  liability,  but  one  the  exact  limits  of  which  are 
in  some  dispute,  depends  on  the  state  of  accounts  be- 
tween the  principal  and  the  agent  at  the  time  the  third 
party  makes  his  claim  against  the  principal.  In  Eng- 
land in  an  early  case  on  the  subject,  the  facts  were  these: 
T  sold  goods  to  A,  who  bought  for  P,  but  without  dis- 
closing that  fact.  In  due  time  P  gave  A  the  money  to  pay 
T,  but  A  did  not  turn  it  over  to  T.  T,  having  discovered 
P's  relation  to  the  contract,  sued  him  on  it;  and  the  case 


(36)  Briggs  v.  Partridge,  64  N.  Y.  357. 

(37)  Pentz  v.  Stanton,  10  Wend.  271. 

(38)  Lerned  v.  Johns,  9  Allen  419. 

(39)  Hlggins  V.  Senior,  8  M.  &  W.  834. 


328  AGENCY 

turned  on  whether  P's  bona  fide  payment  to  A  for  T 
was  a  defense  for  him.     It  was  held  not  to  be,  the  court 
saying  that  P  was  bound  not  merely  to  pay  his  account 
to  his  agent  but  to  see  that  the  agent  whom  he  had  ap- 
pointed, and  for  whom  he  was  therefore  responsible,  dis- 
charged the  obligation  to  T  which  the  principal  had  in- 
curred through  the  contract  of  the  agent  (40).    But,  as 
the  court  suggested  in  the  case,  if  T  by  his  actions  had  in- 
duced P  to  pay  the  money  over  to  A  in  the  bona  fide  be- 
lief that  such  an  act  would  satisfy  T,  then  T  would  be 
estopped  to  claim  from  P.     Thus  if  T  should  say  to  P, 
''I  expect  you  to  have  the  money  in  A's  hands  by  August 
1,  to  meet  the  debt  I  have  against  you,  on  the  contract  I 
made  with  him,*'  a  subsequent  bona  fide  payment  over 
to  A  would  discharge  P's  obligation  to  T.     The  general 
American  doctrine  seems  to  be  that  even  if  the  undis- 
closed principal's  payment  to  his  agent  is  not  induced  by 
the  conduct  of  the  third  party,  the  fact  that  he  has  in 
good  faith  put  the  money  into  the  hands  of  the  agent 
before  he  became  known  as  principal,  so  that  A  was  at 
the  time  still  the  party  on  whom  T  was  relying,  will  be  a 
sufficient  defense  against  a  subsequent  suit  by  T  (41). 

§  128.  Same:  Third  party's  election.  The  third  party 
has  of  course  a  right  of  action  against  the  agent  with 
whom  he  contracted  and  on  whose  credit  he  relied.  He 
has  also,  as  we  have  seen,  a  right  against  the  principal, 
who  was  the  prime  cause  of  the  agent's  contract.  But 
he  has  not  a  right  against  both.     If,  after  discovering  that 


(40)  Heald  v.  Kenworthy,  10  Exch.  739. 

(41)  Laing  v.  Butler,  37  Hun.  144. 


BETWEEN  PRINCIPAL  AND  THIRD  PARTY      329 

the  agent  was  merely  an  agent,  and  learning  who  the 
principal  was,  the  third  party  decides  to  hold  the  agent, 
he  cannot,  after  once  unequivocally  signifying  his  inten- 
tion of  looking  to  the  agent  for  payment,  subsequently 
make  a  claim  against  the  principal.  Thus  where  brokers 
who  had  been  instructed  by  A  to  sell  short  certain 
stocks  did  so,  and,  though  they  were  next  day  told  by 
A  that  he  was  acting  for  P,  proceeded  thereafter  to  sue 
A  and  garnish  a  debt  due  to  him,  it  was  held  that  having 
elected  to  hold  A,  they  could  not  later  bring  suit  against 
P  (42).  It  is  to  be  noted  that  the  election  must  be  made 
after  full  knowledge  of  all  the  facts,  so  that  if  the  brokers' 
suit  had  been  brought  against  A  before  they  knew  that  he 
was  acting  for  P,  they  could  still  have  sued  P  (43). 
When  the  third  party  has  decisively  elected  to  hold  the 
agent  is  a  question  of  evidence.  It  has  been  held  that 
proving  a  claim  against  him  in  bankruptcy  is  not  an  elec- 
tion, nor  is  taking  his  promissory  note.  Even  bringing  an 
action  is  not  conclusive  evidence,  but  the  better  opinion 
seems  to  be  that  the  pursuit  of  an  action  against  the 
agent  to  judgment,  whether  the  judgment  is  satisfied  or 
not,  bars  a  subsequent  suit  against  the  principal  (44). 


(42)  Barrel!  v.  Newby,  127  Fed.  Rep.  656. 

(43)  Steele  Smith  Co.  v.  Potthast,  109  la.  413. 

.(44)     Cobb  V.  Knapp,  71  N.  Y.  348;  Kingsley  v.  DavlB,  104  Mass.  178. 


CHAPTER  IX. 

PRINCIPAL'S  RESPONSIBILITY  FOR  STATEMENTS  AND 
KNOWLEDGE  OF  AGENT. 

§  129.  In  general.  The  principal  may  be  responsible 
not  only  for  his  agent's  acts  but  also  for  his  words. 
Whatever  statements,  admissions,  or  representations,  are 
appropriate  accompaniments  of  the  act  the  agent  is 
authorized  to  do,  are  included  in  the  authority  given  him, 
and  the  principal  is  bound  by  them.  In  a  leading  Eng- 
lish case  on  the  subject  the  court  said:  "As  a  general 
proposition,  what  one  man  says,  not  upon  oath,  cannot  be 
evidence  against  another  man.  The  exception  must  arise 
out  of  some  peculiarity  of  situation,  coupled  with  the 
declarations  made  by  one.  An  agent  may  undoubtedly, 
within  the  scope  of  his  authority,  bind  his  principal,  by 
his  agreement;  and  in  many  cases  by  his  acts.  What  the 
agent  has  said  may  be  what  constitutes  the  agreement 
of  the  principal;  or  the  representations  or  statements 
may  be  the  foundation  of,  or  the  inducement  to,  the  agree- 
ment. Therefore,  if  writing  is  not  necessary  by  law,  evi- 
dence must  be  admitted  to  prove  the  agent  did  make  that 
statement  or  representation.  So,  with  regard  to  acts 
done,  the  words  with  which  those  acts  are  accompanied 
frequently  tend  to  determine  their  quality.  The  party, 
therefore,  to  be  bound  by  the  act,  must  be  affected  by 
the  words"  (1). 


(1)     Fairlie  v.  Hastings,  10  Ves.  Jr.  123. 

330 


BETWEEN  PRINCIPAL  AND  THIRD  PARTY      331 

§  130.    Agent's  statements  as  to  the  fact  of  agency. 
We  have  seen  that  an  agent's  statement  that  he  is  an 
agent   or  that  he  has  certain  powers  as  agent,  does  not 
bind  a  principal.     But  on  the  question  of  the  existence  or 
scope  of  an  agency  the  agent  is  a  competent  witness  m 
a  court  of  law  as  to  facts  within  his  knowledge,  either 
in  his  own  behalf  or  for  another.     Thus  in  a  suit  by  an 
attorney  against  a  corporation  for  the  price  of  his  serv- 
ices, where  the  defence  was  that  he  had  acted  solely  for 
the  president  and  not  for  the  company,  the  attorney  was 
allowed  to  testify  on  his  own  behalf  that  he  had  been  em- 
ployed as  the  attorney  for  the  company,  and  rendered  his 
services  to  it  (2).     And  where  suit  was  brought  against 
P  by  the  holder  of  a  note  signed  by  A  as  agent  for  P, 
A's  evidence  that  he  had  been  given  authority  as  P's 
agent  to  sign  notes  for  him  was  admitted  (3). 

§  131.    Agent's  statements  as  a  part  of  the  transaction. 
If  the  agent  has  been  shown  to  have  authority  to  act  as 
agent  in  a  given  transaction,  then  the  statements,  repre- 
sentations, and  admissions  made  by  him  while  acting  m 
the  transaction,  and  tending  to  characterize  and  explam 
it  or  to  form  an  appropriate  accompaniment  of  it-m  a 
word,  constituting  a  part  of  the  act  authorized-will  be 
binding  on  his  principal.    So  when  an  agent  negotiated  a 
sale  of  coal  by  Pool  measure,  and  the  coal  when  delivered 
was  short  in  weight,  the  agent's  statement  was  admis- 
sible in  an  action  against  the  principal  (4).    It  was  made 
as  a  part  of  the  transaction  and  during  its  carrying  out. 

(2)  Indianapolis  Chair  Co.  v.  Swift,  132  Ind.  197. 

(3)  Rice  V.  Gove,  22  Pick.  158. 

(4)  Peto  V.  Hague,  5  Esp.  134. 


332  AGENCY 

But  when  a  station  agent  who  had  failed  to  send  on  a 
consignment  of  freight  as  he  had  contracted  on  behalf  of 
his  principal,  was  asked  by  the  sender,  a  week  after  the 
time  for  the  performance  of  the  contract,  why  he  had  not 
done  so,  and  answered:  "I  forgot,"  this  admission  as 
to  a  past  transaction  was  held  not  to  bind  his  principal 
(5).  Not  only  is  proximity  in  point  of  time  essential  to 
making  whatever  is  said  by  the  agent  admissible  against 
his  principal,  but,  as  the  court  said  in  Butler  v.  Man- 
hattan Ky.  (6),  **that  alone  is  insufficient  unless  what 
was  said  may  be  considered  a  part  of  the  principal  fact, 
and  so  a  part  of  the  act  itself."  It  is  essential,  of  course, 
that  the  statement  of  the  agent  be  made  as  to  matters 
within  the  scope  of  his  authority.  It  is  not  sufficient  that 
he  be  an  agent  of  the  principal ;  he  must  be  an  agent  with 
authority  for  this  particular  transaction.  Thus  the  ad- 
mission of  a  pawnbroker's  assistant  that  his  master 
had  loaned  money  on  some  plate,  the  loan  having  been 
made  at  his  own  home  outside  his  business,  and  as  a  pri- 
vate transaction,  was  held  inadmissible  as  evidence 
against  the  master,  since  **  there  was  no  evidence  to  show 
the  agency  of  the  shopman  in  private  transactions  uncon- 
nected with  the  business  of  the  shop"  (7).  If  the  agent  can 
be  shown  to  have  an  interest  in  the  transaction  adverse 
to  the  principal's,  his  statements,  even  as  to  matters  touch- 
ing his  agency,  will  not  bind  his  principal  (8), 

§  132.    Notice  to  the  agent  is  notice  to  the  principal 


(5)  Great  Western  Ry.  Co.  v.  Wells,  18  C.  B.  (N.  S.)  748. 

(6)  143  N.  T.  417. 

(7)  Garth  v.  Howard,  8  Bing.  451. 

(8)  Manhattan  Life  Ins.  Co.  v.  Ry.,  139  N.  T.  146. 


BETWEEN  PRINCIPAL  AND  THIRD  PARTY      333 

As  we  have  seen,  one  of  the  agent's  duties  to  the  princi- 
pal is  that  of  communicating  to  the  principal  all  material 
facts  relative  to  the  transaction  in  which  he  is  employed. 
(See  §  83,  above.)  If,  then,  P  appoints  A  to  repre- 
sent him,  A  is  his  representative  to  receive  and  ascertain 
all  these  facts,  and  A's  knowledge  of  them  will  be  imputed 
to  P.  If  T  tells  A  a  material  fact  as  to  the  contract  in 
process  of  being  made  between  him  and  A,  for  P,  he  may 
presume  that  this  fact  is  duly  imparted  to  P,  and  if  A 
learns  it  in  any  other  way  the  same  presumption  is  made. 
Thus  where  A,  the  renting  agent  for  P,  learned  in  the 
course  of  collecting  his  rents  that  P's  premises  were  be- 
ing employed  as  a  gambling  house,  this  knowledge  was 
attributed  to  P,  so  that  he  could  not  recover  the  rent  on 
the  building  used  for  an  illegal  purpose  (9).  This  rule 
has  frequent  applications  in  cases  where  an  agent  knows 
that  the  principal 's  premises  are  unsafe  or  his  machinery 
defective.  Proof  that  the  agent  in  charge  of  these  matters 
knew  of  the  defects  will  show  that  the  principal  is  re- 
sponsible to  persons  injured  thereby  (10). 

§  133.  Same:  Limitations  of  rule.  Notice  to  the  agent 
to  be  binding  on  the  principal,  must  be  notice  given  when 
the  agent  is  acting  in  the  scope  of  his  authority,  and  must 
relate  to  the  business  in  which  the  particular  agent  is  en- 
gaged. In  the  case  of  Congar  v.  Chic.  &  N.  W.  Ry.  Co. 
(11),  it  was  sought  to  hold  the  company  liable  for  sending 
some  nursery  stock  belonging  to  T  to  a  wrong  address. 


(9)  Ryan  v.  Potwin,  62  111.  App.  134. 

(10)  Denver  v.  Sherret,  88  Fed.  Rep.  226. 

(11)  Congar  v.  C.  &  N.  W.  Ry.  Co.,  24  Wis.  157. 


334  AGENCY 

with  the  result  that  the  trees  died  on  the  way.  The  ship- 
ping agents  in  Chicago,  where  the  trees  were  delivered  to 
the  railway,  were  not  negligent ;  but  not  knowing,  as  did 
the  Iowa  agents  of  the  railway,  that  there  were  two  towns 
of  the  same  name  in  Iowa,  they  shipped  the  trees  to  the 
one  which  was  directly  on  their  line,  whereas  the  con- 
signee lived  in  the  other.  To  fasten  negligence  on  the 
railway,  T  urged  that  the  knowledge  of  the  Iowa  agents 
was  the  knowledge  of  the  company,  but  the  court  decided 
otherwise,  saying:  "The  principal  is  chargeable  with  the 
knowledge  of  his  agent,  because  the  agent  is  substituted 
in  his  place  and  represents  him  in  that  particular  transac- 
tion; and  it  would  seem  to  be  an  obvious  perversion  of 
the  doctrine  if  in  the  same  transaction  the  principal  were 
likewise  to  be  charged  with  the  knowledge  of  other  agents 
not  engaged  in  it,  and  to  whom  he  had  delegated  no  au- 
thority with  respect  to  it." 

§  134.  Notice  must  be  received  in  the  course  of  the 
agency.  If  the  information  has  been  acquired  before  the 
agency  began,  the  rule  of  the  majority  of  American  courts 
is  that  the  agent's  knowledge  is  notice  to  the  principal 
only  when  the  agent  actually  had  the  fact  in  question  in 
mind  at  the  time  of  his  transaction  for  the  principal,  and 
also  when  it  was  not  such  a  fact  as  a  due  regard  for  his 
duty  to  an  earlier  principal  would  inhibit  him  from  dis- 
closing to  the  one  sought  to  be  charged.  In  the  case  of 
The  Distilled  Spirits  (12),  P  sought  to  reclaim  from 
United  States  officers  distilled  spirits  which  they  had 
seized  for  a  violation  of  the  revenue  laws,  and  P  claimed 


(12)     The  Distilled  Spirits,  11  Wall.  356. 


BETWEEN  PRIxXClPAL  AND  THIRD  PARTY      335 

to  have  bought  them  through  A  without  any  knowledge 
of  the  violation.  A  was  alleged  to  have  known,  before 
he  became  P  's  agent,  of  a  fraud  committed  on  the  revenue 
officers.  The  Supreme  Court  laid  down  the  rule  that  if 
the  jury  believed  that  A  remembered  the  fraud  when  he 
bought  the  liquor  on  P's  behalf,  and  if  he  could  have  told 
P,  then  his  knowledge  would  be  P's.  The  court  suggested 
that  if  A's  knowledge  of  the  fraud  had  been  acquired  con- 
fidentially as  attorney  for  a  former  client,  such  knowl- 
edge not  being  rightfully  communicable  to  P  could  not  be 
imputed  to  him.  The  burden  of  proving  the  agent's  state 
of  mind  and  his  ability  to  disclose  to  his  present  principal 
is  on  the  party  alleging  that  the  principal  had  notice  (13). 
Some  courts  hold  absolutely  that  it  is  only  during  the 
term  of  the  agency  that  notice  to  an  agent  is  notice  to 
his  principal  (14). 

§  135.  Notice  to  an  agent  adversely  interested  is  not 
notice  to  the  principal.  The  rule  of  notice  is  intended  for 
the  protection  of  third  parties  who  should  be  able  to  pre- 
sume that  material  facts  brought  to  the  agent  with  whom 
they  are  dealing  in  a  given  transaction  will  be  communi- 
cated to  the  principal,  or  at  least  acted  on  by  the  agent 
with  the  principal's  full  permission.  If,  however,  the 
fact  brought  to  the  agent's  knowledge  is  such,  or  the 
agent's  conduct  is  such,  as  to  make  a  reasonable  man  un- 
derstand that  the  agent  will  not  communicate  it  to  the 
principal — as  for  example  where  the  agent  is  acting  for 
himself  and  adversely  to  his  principal — then  notice  to  the 


(13)  Constant  v.  University  of  Rochester,  111  N.  Y.  604. 

(14)  McCormick  v.  Joseph,  83  Ala.  401. 


336  AGENCY 

agent  will  not  bind  the  principal.  So  where  A,  acting  in 
his  own  personal  interest,  sells  land  to  a  company  of 
which  he  as  president  was  purchasing  agent  with  author- 
ity to  buy,  his  knowledge  that  the  title  is  defective  is  not 
imputable  to  his  principal,  the  company  (15). 

§  136.  Notice  to  agents  of  corporations.  The  rule  of 
notice  applies  to  corporations  as  well  as  to  natural  per- 
sons, and  is  very  important  in  this  connection  since  cor- 
porations can  act  only  through  their  agents.  If,  then,  an 
agent  of  a  company,  acting  in  a  transaction  within  the 
scope  of  his  authority,  obtains  any  knowledge  material 
to  the  transaction,  the  knowledge  is  thus  brought  home 
to  the  company,  whether  the  agent  communicates  it  to 
the  board  of  directors  or  not.  Thus  where  a  director 
of  a  bank  who  acted  as  agent  for  the  bank,  as  authorized 
by  custom,  in  discounting  a  note,  knew  the  note  to  be 
fraudulent,  the  bank  was  charged  with  his  knowledge. 
The  court  said  that ' '  if  the  note  is  discounted  by  the  bank 
the  mere  fact  that  one  director  knew  of  the  fraud  or  ille- 
gality will  not  prevent  the  bank  from  recovering.  But 
if  the  director  who  has  such  knowledge  acts  for  the  bank 
in  discounting  the  note,  his  act  is  the  act  of  the  bank,  and 
the  bank  is  affected  with  his  knowledge"  (16).  It  will 
be  noted  that  the  knowledge  must  be  acquired  by  the  agent 
in  the  course  of  his  employment,  and  with  reference  to 
a  transaction  in  which  he  himself  is  engaged.  The  usual 
rule  as  to  adverse  interest  also  applies. 

§  137.    Notice  to  sub-agents.    If  either  by  custom  or  by 


(15)  Barnes  v.  Trenton  Gas  Co.,  27  N.  J.  Eq.  33. 

(16)  Innerarity  v.  Bank,  139  Mass.  332. 


BETWEEN  PRINCIPAL  AND  THIRD  PARTY      337 

express  authority  an  agent  lias  power  to  appoint  sub- 
agents  who  will  themselves  be  agents  of  the  principal, 
notice  to  these  sub-agents  is  notice  to  the  principal.  So 
insurance  companies,  whose  general  agents  by  custom  of 
business  appoint  sub-agents  to  write  insurance  for  them, 
are  liable  for  the  knowledge  of  these  sub-agents.  In  a 
case  where  such  a  sub-agent,  who  had  written  a  policy 
on  T  's  goods,  failed  to  disclose  to  his  company  that  T  was 
insured  in  another  company,  although  he  had  been  told 
so  by  T,  the  company  was  still  held  chargeable  with  the 
information  given  to  its  sub-agent,  who  had  been  ap- 
pointed without  knowledge  of  the  board  of  directors  by 
one  of  the  company's  general  agents  (17). 


(17)     Goode  V.  Ins.  Co.,  92  Va.  392. 


CHAPTER  X. 
PRINCIPAL'S  RIGHTS  AGAINST  THIRD  PARTIES. 

§  138.  In  general.  In  his  capacity  as  agent  the  repre- 
sentative of  a  principal  may  deal  wrongfully  by  his  prin- 
cipal, and  by  exceeding  or  transgressing  his  authority 
may  give  the  principal  rights  against  third  parties  who 
have  dealt  with  him.  The  liability  of  the  third  party  to 
the  principal  may  be  in  tort,  in  quasi  contract,  or  in  con- 
tract, and  may  be  enforceable  in  law  or  in  equity. 

§  139.  Rights  of  principal  against  third  party  in  tort. 
If  the  agent  has  wrongfully  parted  with  property  en- 
trusted to  him  by  his  principal,  if  for  instance  he  has 
bartered  or  pledged  property  given  him  to  sell,  or  has 
transferred  it  to  a  third  party  to  pay  his  own  debts,  the 
principal  can,  with  the  exceptions  noted  below,  recover  it 
from  any  person  who  has  it.  It  does  not  matter  that  the 
third  party  is  innocent  in  his  assumption  of  possession 
over  the  goods  he  has  obtained.  He  is  bound  to  ascertain 
the  agent's  right  to  dispose  of  them,  and  his  good  faith 
is  insufficient  to  protect  him  from  the  claim  of  the  rightful 
owner.  This  is  true  whether  the  third  party  thought  the 
agent  from  whom  he  bought  was  himself  the  real  owner 
or.  merely  an  agent.  The  principal  cannot  be  divested  of 
his  property  except  by  his  own  act  or  by  operation  of 
law.  So  where  the  third  party  had  traded  wines  for  rum 
with  A  in  good  faith,  thinking  A  the  owner  of  the  rum 

338 


BETWEEN  PRINCIPAL  AND  THIRD  PARTY      339 

whereas  he  was  only  an  agent  of  P  with  power  to  sell, 
P  recovered  the  value  of  the  rum  from  T,  because  A  had 
no  authority  to  barter  (1).  So  also  where  a  horse  had 
been  delivered  to  an  agent  for  sale,  and  he  turned  it  over 
to  a  third  party  in  payment  of  a  debt,  the  owner  was  al- 
lowed to  maintain  replevin  for  the  horse  even  against  a 
bona  fide  purchaser  (2). 

§  140.    Same:    Exceptions.    If,  however,  the  property 
consists  of  currency  or  negotiable  instruments,  and  T 
is  a  bona  fide  purchaser  without  notice,  or  if  A  has  in  his 
possession  documentary  evidence  of  title  in  himself,  or  if 
the  case  falls  under  the  operation  of  the  factors'  acts,  P 
cannot  recover  either  the  property  or  damages  against  the 
innocent  holder  for  value.    Title  to  negotiable  instruments 
or  currency  passes  by  delivery  to  any  bona  fide  purchaser 
for  value  without  notice  (3).    And  where  the  agent  has 
been  entrusted  by  the  principal  with  documentary  evi- 
dence of  title  in  himself,  the  principal's  conduct  in  so 
entrusting  his  agent  with  this  evidence  estops  him  from 
disputing  the  agent's  right  to  pass  a  good  title.      So 
where  P  has  allowed  A  to  stand  as  registered  owner  of  a 
vessel,  or  as  the  registered  holder  of  a  carter's  license, 
he  cannot  recover  from  a  third  party  to  whom  the  ship 
or  the  truck  has  been  wrongfully  disposed  of  by  the  agent 
(4) .    However,  a  mere  possession  of  the  goods  themselves 
by  the  agent  is  not  sufficient  to  estop  the  principal  from 
asserting  title  to  them  in  the  hands  of  an  innocent  pur- 

(1)  Guerreiro  v.  Peile,  3  B.  &  Aid.  616. 

(2)  Parsons  v.  Webb,  8  Me.  38. 

(3)  Ayer  v.  Tilden,  15  Gray  178. 

(4)  Calais  Co.  v.  Van  Pelt.  2  Black.  372. 


340  AGENCY 

chaser  who  had  relied  on  the  agent's  possession,  since  that 
possession  is  consistent  with  various  explanations  other 
than  ownership.  A  may  have  had  the  goods  entrusted 
to  him  by  the  principal  for  repair,  safe-keeping,  or  sale 
on  commission,  and  a  buyer  from  A  takes  them  at  his  own 
risk  (5).  The  statutory  exception  in  the  case  of  trans- 
fer to  innocent  parties  by  factors  has  already  been  dis- 
cussed.   (See  §  116,  above.) 

§  141.  Same  (continued).  If  the  third  party  himself 
injures  or  converts  the  principal's  property  in  the  agent's 
possession,  he  is  of  course  liable  to  the  principal.  So 
also  if  he  commits  a  fraud  on  the  agent  in  the  transaction 
with  the  agent,  for  example  by  fraudulently  misrepre- 
senting to  him  the  quantity  and  quality  of  a  consignment 
of  lumber  he  was  selling  the  agent  for  his  principal  (6). 
If  the  third  party  colludes  with  the  agent  to  defraud  the 
principal,  the  third  party  as  well  as  the  agent  is  liable, 
and  the  principal  may  recover  against  both.  In  the  case 
of  Salford  v.  Lever  (7),  P  authorized  A  to  buy  coal  for 
him.  A  conspired  with  T,  a  coal  dealer,  to  charge  P  an 
extra  price  for  the  coal,  and  turn  over  the  additional  profit 
to  A  for  giving  T  the  contract.  P  recovered  the  profit 
from  A,  and  was  also  allowed  damages  against  T.  If  the 
third  party  unlawfully  prevents  the  agent  from  serving 
the  principal,  by  injuring  him  or  otherwise  disabling  him 
from  service,  the  principal  has  a  right  of  action  against 
the  third  party.  So  where  T  maliciously  caused  the  arrest 
of  A,  an  engine-driver  for  the  P  company,  with  intent  to 


(5)  See  Pickering  v.  Busk,  15  East  38. 

(6)  Gushing  v.  Rice,  46  Me.  303. 

(7)  Salford  v.  Lever,  (18&1)  1  Q.  B.  168. 


BETWEEN  PRINCIPAL  AND  THIRD  PARTY      341 

delay  P*s  train,  P  recovered  damages  (8).  Again,  if  the 
third  party  unlawfully  entices  the  agent  from  his  work, 
or  induces  him  to  break  his  contract  with  the  principal, 
the  principal  has  a  right  of  action  against  the  third  party. 
See  Torts,  §§  331,  336-37,  in  Volume  II  of  this  work. 

§  142.  Rights  of  principal  against  third  party  in  quasi 
contract.  If  P's  agent  has  paid  money  to  a  third  party 
under  a  mistake  of  fact,  or  if  P  has  paid  it  himself,  in- 
duced by  a  mistake  of  fact  on  his  agent's  part,  or  if  the 
agent  has  paid  money  under  fraud  or  duress  on  the  part 
of  the  third  party — in  any  of  these  cases  P  may  recover 
the  money  from  the  third  party  in  an  action  for  money 
had  and  received  (9). 

^  143,  Rights  of  disclosed  principal  against  third 
party  in  contract.  When  the  princijjal  has  been  named 
by  the  agent  as  the  person  on  whose  behalf  he  is  acting, 
and  the  agent  is  within  his  authoritj^  either  previously 
conferred  by  appointment  or  subsequently  by  ratification, 
the  principal  is  the  only  one  who  can  recover  from  the 
third  party  on  the  contract.  In  America  this  is  true  even 
when  the  principal  is  a  resident  of  a  foreign  country  (10). 
Even  if  the  agent  has  embodied  his  contract  in  writing 
and  omitted  the  name  of  the  principal  from  the  written 
instrument,  then,  if  the  contract  is  not  a  contract  under 
seal  or  a  negotiable  instrument,  the  principal  can  show 
by  parol  evidence  that  the  contract  was  made  on  his  be- 


(8)  St.  Johnsbury  Ry.  Co.  v.  Hunt,  55  Vt.  570. 

(9)  Lane  v.  Boom  Co.,  62  Mich.  63;  Stevenson  v.  Mortimer,  Cowp. 

805. 

(10)  Kirkpatrick  v.  Stainer,  22  Wend.  244. 
Vol.  1—27 


342  AGENCY 

half,  and  can  sue  the  third  party  on  it  (11).  But  if  the 
contract  is  under  seal  or  a  negotiable  instrument,  only 
the  parties  named  in  the  writing  can  sue  on  it,  and  parol 
evidence  cannot  be  introduced  to  give  the  principal  a 
cause  of  action  upon  it  ( 12 ) .  To  make  these  forms  of  con- 
tract valid  for  purposes  of  the  principal's  suit  on  them, 
they  should  be  in  his  name,  and,  if  sealed,  under  his  seal, 
and  professing  to  be  his  deed.  A  should  sign  with  P's 
name,  thus:  ''P  by  A,"  although  "A  for  P"  is  also  rec- 
ognized as  a  good  signature  if  the  instrument  elsewhere 
discloses  that  it  was  intended  to  be  P's  (13). 

§  144.  Same :  Rights  of  undisclosed  principal  against 
third  party  in  contract.  When  an  agent  having  authority 
makes  a  contract  with  a  third  party,  but  does  not  disclose 
his  agency,  there  are  two  cases,  which  for  our  present  in- 
quiry must  be  distinguished.  The  agent  may  disclose 
neither  the  name  nor  the  existence  of  his  principal,  or  he 
may,  while  disclosing  the  fact  that  he  is  acting  under  a 
principal,  withhold  the  principal's  name. 

§  145.  Same:  In  general  principal  can  recover.  In 
general  the  principal  can  disclose  his  relationship  to  the 
contract,  and  recover  on  it  from  the  third  party.  Thus 
where  A  sold  hemlock  bark  to  T  under  a  written  contract 
made  in  A's  own  name  and  not  in  any  way  intimating 
that  he  was  an  agent,  or  that  anyone  else  was  interested 
in  the  contract,  P  was  able  to  prove  by  parol  evidence 
that  she  was  the  owner  of  the  bark,  and  that  A  made  the 


(11)  Bateman  v.  Phillips,  15  East  272. 

(12)  Briggs  V.  Partridge,  64  N.  Y.  357;  and  see  S  126,  above. 

(13)  Mussey  v.  Scott,  7  Cush.  215;   and  see  Bryson  v.  Lucas,  84 
N.  C.  650. 


BETWEEN  PRINCIPAL  AND  THIRD  PARTY  ^  343 

contract  as  her  agent,  and  on  these  grounds  to  re<M)ver 
from  T  the  contract  price  (14).  Since  the  third  party  has 
a  right  of  action  on  the  contract  against  the  undisclosed 
principal  for  a  breach  on  the  principal's  part,  it  seems 
just  to  allow  the  principal  a  similar  remedy  for  a  breach 
on  the  part  of  the  third  party. 

§  146.  Exceptions  to  rule:  State  of  accounts  between 
agent  and  third  party.  If  the  third  party,  relying  upon 
the  agent's  apparent  principalship,  has  acquired  a  right 
of  set-off  against  him  or  has  in  good  faith  paid  him  on 
the  contract,  the  principal  cannot  then  recover  the  full 
amount  against  the  third  party.  He  must  allow  the  set- 
off or  the  payment.  Thus  where  P  had  entrusted  tobacco 
to  A  to  sell,  and  A  sold  in  his  own  name  to  T,  and  later 
T,  in  view  of  the  obligation  he  had  to  meet,  took  from  a 
debtor  of  his  own  a  bill  of  exchange  accepted  by  A,  T  was 
allowed  to  set  this  off  against  P's  claim  when  sued  by  P 
on  the  contract  (15).  But  it  is  necessaiy  that  T  have 
relied  on  A's  principalship.  So  if  he  knows  that  A  is 
merely  an  agent,  though  A  has  disclosed  only  the  exist- 
ence and  not  the  name  of  his  principal,  he  cannot  set  up 
a  counter  obligation  or  a  payment  to  A.  He  did  not  rely 
on  the  sole  credit  of  A,  and  he  must  recognize  P's  right  as 
the  prime  mover  in  the  contract.  Even  if  A  is  known  to 
T  as  acting  sometimes  for  himself  and  sometimes  for  a 
principal,  as  for  instance  many  commission  merchants 
do,  selling  goods  of  their  own  as  well  as  on  commission, 
T  cannot  then  assume  that  A  when  dealing  with  him  is 


(14)  Huntington  v.  Knox,  7  Cush.  371. 

(15)  George  v.  Clagett,  7  T.  R.  359. 


344  AGENCY 

contracting  for  himself.  He  is  bound  to  inquire  as  to  the 
character  in  which  A  is  acting  in  a  particular  transaction, 
and  if  he  fails  to  do  so  he  cannot  be  allowed  the  benefit 
of  a  set-off  against  the  undisclosed  principal  (16). 

§  147.  Same:  Negotiable  paper  and  sealed  instru- 
ments. As  has  been  already  noted,  the  law  of  undisclosed 
principal  has  no  application  to  sealed  instruments  and 
negotiable  papers,  and  the  principal  gets  no  rights  on 
these  forms,  as  he  has  no  liabilities.    (See  §  126,  above). 

§  148.  Same:  Where  agent  has  expressly  represented 
himself  as  principal  in  a  written  instrument.  If  the  agent 
has  in  express  terms  represented  himself  as  principal  in 
a  written  instrument,  the  parol  evidence  rule  will  pre- 
vent the  principal  from  showing  that  he  is  a  principal 
in  order  to  sue  on  the  contract  (17).  But  if  the  agent  is 
a  real  principal,  though  in  the  instrument  he  represented 
himself  as  the  agent  of  an  undisclosed  principal,  he  may 
later  sue  as  principal  himself,  since  the  third  party,  after 
all,  relied  on  his  credit  when  he  made  the  contract  (18). 

§  149.  Same:  Where  personal  reliance  is  placed  in 
agent.  If  the  contract  was  expressly  made  with  the  agent 
as  principal,  and  it  can  be  shown,  either  from  the  written 
documents  embodying  the  transaction  or  from  the  accom- 
panying negotiations  not  put  in  writing,  that  a  special 
personal  trust  or  confidence  was  reposed  in  the  agent  as 
principal,  e.  g.,  on  account  of  the  personal  nature  of  the 
services  contracted  for,  then  the  principal  cannot  get 


(16)  Baxter  v.  Sherman,  73  Minn.  434. 

(17)  Humble  v.  Hunter,  12  Q.  B.  310. 

(18)  Smaltz  v.  Avery,  16  Q.  B.  656. 


BETWEEN  PRINCIPAL  AND  THIRD  PARTY      345 

rights  on  the  contract.  If  A  in  his  own  name  contracted 
with  T  to  write  a  book  for  T  's  publishing  house,  P  could 
not  later  show  that  A  was  acting  as  agent  for  him  and 
recover  on  the  contract  from  T.  So  also  where  A  sold 
T  a  yoke  of  oxen  for  P,  a  man  with  whom  T  was  un- 
willing to  have  any  dealings,  and  T,  finding  that  they 
were  P's  oxen,  refused  to  take  them,  P  got  no  rights  on 
the  contract  of  sale  (19). 

§  150.  Liability  of  the  third  party  to  the  principal  in 
equity.  In  equity  the  principal  is  given  a  right  to  follow 
any  property  of  his  which  has  through  his  agent  come 
into  the  hands  of  any  other  than  a  bona  fide  purchaser  for 
value.  Thus  where  an  agent  has  deposited  funds  of  his 
principal  with  a  bank,  in  an  account  opened  with  '*A  & 
Co.,  agents,"  if  the  bank  holds  claims  against  A  &  Co.  it 
cannot  on  the  authority  of  A  charge  this  account  with  a 
debt  owed  it  by  A  (20). 


(19)  Winchester  v.  Howard,  97  Mass.  303. 

(20)  Baker  v.  Bank,  100  N.  Y.  31;  and  see  the  article  on  Trusts  in 
Volume  VI  of  this  work. 


PART  III. 

THE  RELATION  AS  BETWEEN  AGENT  AND 
THIRD  PARTY. 

CHAPTER  XI. 

AGENT'S  LIABILITY  TO  THIRD  PARTY. 

Sfx::tion  1.     Torts. 

§  151.  In  general  agent  is  liable  for  torts.  The  agent 
or  servant  in  serving  his  principal  may  injure  third  par- 
ties. He  may  do  so  in  obedience  to  his  principal's  orders 
or  through  his  own  disobedience,  carelessness,  or  malice. 
But  the  fact  that  he  is  in  the  employ  of  another  makes 
absolutely  no  difference  in  his  own  liability  to  the  third 
parties  for  violations  of  their  rights.  An  agent  is  no  more 
or  less  liable  personally  because  of  his  agency.  His  duty 
to  third  parties  not  to  injure  them  exists  quite  apart  from 
the  relation  he  has  entered  into.  But  he  is  not  liable  for 
any  loss  they  suffer  through  him  where  he  owes  no  duty 
to  them. 

§  152.  No  liability  for  non-performance  of  duty  owed 
solely  to  principal.  As  the  court  said  in  the  case  of  De- 
laney  v.  Rochereau  (1) :  "An  agent  is  not  responsible  to 
third  parties  for  any  negligence  in  the  performance  of 
duties  devolving  upon  him  purely  from  his  agency,  since 
he  cannot  as  agent  be  subjected  to  any  obligations  toward 

(1)     Delaney  v.  Rochereau,  34  La.  Ann,  1124. 

S46 


BETWEEN  AGENT  AND  THIRD  PARTY  347 

third  parties  other  than  those  of  his  principal.  These 
duties  are  not  imposed  upon  him  by  law.  He  has  agreed 
with  no  one  except  his  principal  to  perform  them.  In 
failing  to  do  so  he  wrongs  no  one  but  his  principal,  who 
alone  can  hold  him  responsible."  An  illustration  is  fur- 
nished by  Denny  v.  Manhattan  Co.  (2).  A  New  York 
bank  acted  as  agent  of  a  Tennessee  bank,  and  kept  a  stock 
transfer  book  for  the  latter.  T,  who  had  bought  shares 
in  the  Tennessee  bank,  applied  to  the  New  York  bank  as 
transfer  agent  to  transfer  the  shares  into  his  name,  so 
that  he  could  make  a  sale  of  them.  The  New  York  bank 
refused  to  make  the  transfer,  and  T  lost  his  sale.  He  sued 
the  agent  bank,  but  the  court  held  that  he  could  not  re- 
cover from  it.  The  bank's  refusal  was  not  a  breach  of 
any  duty  owed  to  T.  It  had  a  duty  to  make  the  transfer, 
but  that  duty  arose  from  its  agency  for  the  Tennessee 
bank.  It  owed  it  to  its  principal  and  not  to  T.  T  *s  action 
lay  against  the  principal  and  not  against  its  agent. 

§  153.  Liability  for  performance  of  duty  to  principal 
injurious  to  third  party.  If  by  order  of  his  principal  an 
agent  does  an  act  which  wrongs  a  third  party,  the  agent 
is  liable  as  well  as  the  principal.  So  where  A  by  P's 
direction  set  fire  to  a  prairie  whereby  T's  property  was 
burned,  A  was  held  equally  liable  with  P  (3).  And  if  in 
the  performance  of  a  duty  to  the  principal,  which  if  prop- 
erly performed  would  not  injure  anyone,  the  agent  exe- 
cutes his  commission  so  improperly  as  to  injure  a  third 
party,  the  agent  is  liable.    Thus  where  A  was  directed 


(2)  2  Denio  115. 

(3)  Johnson  v.  Barber,  10  111.  425. 


348  AGENCY 

by  P  to  put  up  a  block  and  tackle  in  a  factory,  and  lie 
left  bis  work  unfinisbed  and  tbe  block  so  negligently  sus- 
pended tbat  it  fell  on  T  and  injured  bim,  A  was  beld  liable. 
Tbe  court  said:    "It  is  doubtless  true  tbat  if  an  agent 
never  does  anytbing  toward  carrying  out  bis  contract  witb 
bis  principal,  but  wbolly  omits  and  neglects  to  do  so,  tbe 
principal  is  tbe  only  person  wbo  can  maintain  any  action 
against  bim  for  tbe  nonfeasance.    But  if  tbe  agent  once 
actually,  undertakes  and  enters  upon  tbe  execution  of  a 
particular  work,  it  is  bis  duty  to  use  reasonable  care  in 
tbe  manner  of  executing  it,  so  as  not  to  cause  any  injury 
to  tbird  persons,  wbicb  may  be  tbe  natural  consequence 
of  bis  acts;   and  be  cannot,  by  abandoning  its  execution 
midway,  and  leaving  tilings  in  a  dangerous  condition,  ex- 
empt bimself  from  liability  to  any  person  wbo  suffers 
injury  by  reason  of  bis  baving  so  left  tbem  witbout  proper 
safeguards"  (4).    So  again  wbere  A,  a  bouse  agent,  bad 
tbe  water  turned  on  in  a  business  block  wbicb  he  bad 
cbarge  of,  witbout  observing  tbe  necessary  precaution  of 
inspecting  tbe  taps  to  see  tbat  tbey  were  all  sbut  off,  be 
was  beld  liable  to  a  tenant  wbose  stock  was  damaged  by 
leakage  from  an  open  tap  above  bis  store  (5).    By  tbe 
better  opinion  tbe  rule  applies  in  cases  wbere  a  real  estate 
agent  entrusted  witb  tbe  possession  and  control  of  vacant 
premises  puts  a  lessee  into  possession  wben  be  knows  or 
ougbt  to  know  tbey  are  in  sucb  disrepair  as  to  be  danger- 


(4)  Osborne  v.  Morgan,  130  Mass.  102. 

(5)  Bell  V.  Josselyn,  3  Gray  309. 


BETWEEN  AGENT  AND  THIRD  PARTY    349 

ous.    If  his  negligence  leads  to  injury  to  the  one  he  put 
in  possession  he  is  liable  (6). 

Section  2.    Conteacts  for  Disclosed  Principal. 

§  154.  Agent  generally  not  liable.  If  A,  acting  under 
instruction  from  P,  steps  into  T  's  shop  and  asks  T  to  do 
some  work  for  P,  T  cannot  subsequently  elect  to  hold 
A  responsible  on  the  contract  (1).  The  mere  act  of  order- 
ing does  not  make  the  agent  liable  where  he  tells  the  third 
party  his  relation  to  the  transaction.  That  statement  is 
equivalent  to  a  declaration  of  intention  not  to  be  bound 
personally.  But  if  at  the  time  of  making  the  contract  T 
tells  A  that  he  will  do  the  work  only  if  A  himself  will  be 
responsible  and  A  consents,  then  A  will  be  personally 
liable.  Whether  the  contract  has  been  thus  made  so  as 
to  bind  A  is  a  question  of  the  intention  of  the  parties  (2). 
In  some  occupations,  however,  A^s  intent  to  assume  per- 
sonal liability  will,  by  the  custom  of  the  business,  be  pre- 
sumed in  the  absence  of  an  express  stipulation  to  the 
contrary  (3). 

§  155.  Written  contracts  not  under  seal.  If  the  con- 
tract made  by  the  agent  for  a  disclosed  principal  is  put 
in  writing,  its  terms  usually  bind  the  principal  alone.  But 
the  agent  may  fail  to  embody  his  disclosure  of  the  princi- 
pal in  the  writing,  or  may  in  some  other  way  make  the 
contract  in  apt  terms  to  bind  himself  personally.  The 
agent   is   not   then   allowed   so   far   to    contradict   the 


(6)     Baird  v.  Shipman,  132  111.  16,  but  compare  Van  Antwerp  v. 
Linton,  89  Hun.  417. 

(1)  Owen  V.  Gooch,  2  Esp.  567. 

(2)  Addison  v.  Gandassequi,  4  Taunt.  574. 

(3)  Pike  V.  Ongley,  18  Q,  B.  D.  708. 


350  AOENCY 

written  instrument  as  to  show  by  parol  evidence  that  the 
intention  was  not  to  bind  him.  This  is  held  despite  the 
fact  that,  as  we  have  seen,  parol  evidence  may  be  intro- 
duced, when  the  principal's  name  is  lacking,  to  bind  the 
principal  also,  "for  to  allow  evidence  to  be  given  that  the 
party  who  appears  on  the  face  of  the  instrmnent  to  be 
personally  a  contracting  party,  is  not  such,  would  be  to 
allow  parol  evidence  to  contradict  the  written  agreement, 
which  cannot  be  done"  (4).  p]ven  if  the  agent  has  signed 
his  name  with  the  affixed  word  "agent,"  or  has  described 
himself  in  the  body  of  the  instrument  as  an  agent,  he  is 
not  thereby  relieved  from  liability  (5).  But  if,  although 
he  signs  the  contract  with  his  own  name,  yet  in  the  instru- 
ment he  indicates  that  he  is  acting  for  a  principal  whom 
he  names,  as  in  the  phrase:  "We  have  this  day  sold  to 
you,  on  account  of  James  Morand  &  Co.,  2,000  cases  of 
oranges,"  he  thereby  frees  himself  from  liability  (6). 

§  156.  Sealed  and  negotiable  instruments.  If  the  in- 
strument is  under  seal,  only  the  parties  named  in  the 
instrument  can  be  charged  on  it.  So  if  the  agent  fails  to 
embody  his  principal's  name  in  an  instrument  required 
by  law  to  be  under  seal,  and  does  put  in  his  own  name,  he 
himself  is  bound  (7).  The  name  of  the  principal  need 
not  appear  in  the  signature  if  it  appears  elsewhere  so 
as  to  allow  the  court  to  construe  the  document  as  the 
principal's.  If  the  writing  is  a  negotiable  instrument, 
the  person  in  whose  name  it  is  executed  is  liable  on  it. 


(4)  Higgins  v.  Senior,  8  M.  &  W.  834. 

(5)  Brown  v.  Bradlee,  156  Mass.  28. 

(6)  Gadd  v.  Houghton.  1  Exch.  Div.  357. 

(7)  Taft  V.  Brewster,  9  Johns  334. 


BETWEEN  AGENT  AND  THIRD  PARTY  351 

So  if  A  has  executed  it  in  his  own  name,  he  cannot  intro- 
duce parol  evidence  to  show  that  the  intention  of  the 
third  party  and  himself  was  to  make  the  contract  binding 
on  the  principal  and  not  on  the  agent.    Thus  where  an 
agent  made  a  note  promising  to  pay  T  £100  and  signed  it 
'^  A,  Trustee,"  he  was  not  allowed  to  show  that  he  entered 
into'  the  contract  on  behalf  of  a  building  society.    He  had 
made  the  note  in  his  own  name,  and  the  addition  "Trus- 
tee" was  immaterial  when  the  note  did  not  disclose  any 
person  for  whom  he  was  acting  (8).    Various  jurisdic- 
tions, however,  modify  the  rigor  of  this  rule  as  to  ne- 
gotiable instruments  by  judicial  interpretations  so  num- 
erous and  diverse  as  to  be  beyond  the  scope  of  this  present 
discussion. 

§157.    Liability   for   unauthorized   contracts.      The 
agent  may,  through  innocent  mistake  or  negligence,  or 
with  deliberate  intention,  make  with  a  third  party  a  con- 
tract, professedly  by  authority  of  the  principal,  which  au- 
thority in  fact  he  did  not  possess.    In  such  a  case  if  the 
third  party  entered  into  the  contract  in  good  faith,  be- 
lieving that   the   agent  had   the   authority,   the   agent, 
whether  he  acted  in  good  faith  or  not,  is  liable  for  the 
breach  of  his  implied  warranty  that  he  did  have  authority. 
The  doctrine  of  implied  warranty  took  its  form  in  the 
case  of  Collen  v.  Wright  (9) .   In  that  case  A  was  a  renting 
agent  for  P's  property,  and  innocently  exceeded  his  au- 
thority by  leasing  a  certain  tract  to  T  on  terms  he  had  no 
right  to  make.    T  sued  P  on  this  lease  in  equity,  and  lost. 

(8)  Price  v.  Taylor.  5  H.  &  N.  540. 

(9)  Collen  v.  Wright,  8  E.  &  B.  647. 


352  AGENCY 

A  had  in  the  meanwhile  died,  and  T  brought  suit  against 
A's  executors  on  account  of  the  losses  he  had  suffered 
through  relying  on  A's  lease.  The  court  held  that  in 
consideration  of  T's  entering  into  the  main  contract  with 
P  (i.  e.,  the  lease)  A  had  impliedly  promised  that  he 
had  authority  to  make  the  main  contract  on  P's  behalf, 
and  for  his  failure  to  make  this  promise  good  he  would 
be  liable;  and  the  right  of  action  against  him  for  the 
breach  would  survive  his  death.  The  amount  of  damages 
the  third  party  is  allowed  in  such  case  is  the  amount  of 
loss  resulting  as  a  net  and  probable  consequence  of  the 
breach  of  contract.  So  in  Collen  v.  Wright,  T  recovered, 
in  addition  to  what  he  lost  through  not  getting  the  prop- 
erty he  had  leased,  also  the  costs  of  his  unsuccessful  suit 
against  P.  If  the  misrepresentation  of  authority  is  con- 
sciously made  with  the  intention  to  deceive,  the  injured 
party  has  a  right  of  action  in  tort  for  wilful  deceit  (10). 
If,  however,  the  agent  does  not  deceive  the  third  party, 
for  instance  where  the  third  party  knows  all  the  facts 
himself,  he  cannot  recover  against  the  agent.  So  where 
an  agent  signed  a  contract:  *'by  telegraphic  authority 
of  [P],  [A],  as  agent,"  the  court  admitted  evidence  to 
show  that  such  a  signature  by  business  custom  was  used 
by  agents  to  disavow  any  other  authority  than  that  of 
a  possibly  erroneous  telegram  (11).  So  also  if  A  in 
good  faith  puts  T  in  possession  of  all  the  facts  on  which 
A  himself  relies  as  constituting  his  authority,  and  T,  ex- 
ercising his  own  judgment  on  the  facts,  concludes  the  con- 


(10)  Noyes  v.  Loring,  55  Me.  408. 

(11)  Lilly  V.  Smales,  (1892)   1  Q.  B.  456. 


BETWEEN  AGENT  AND  THIRD  PARTY  353 

tract  with  A  on  that  basis,  A  is  not  personally  liable  to  T. 
Thus  in  the  case  of  Smout  v.  Ilbery  (12),  P's  wife  went 
into  T's  butcher  shop  and  said,  ''My  husband  is  on  a 
voyage  to  China.  I  wish  to  buy  meat  for  the  family." 
T  supplied  her  with  meat.  Later,  news  came  that  prior 
to  the  time  of  the  request  by  his  wife  P  had  died,  so  that 
his  wife's  agency  had  been  put  an  end  to.  But  it  was 
held  that  the  wife  was  not  liable  on  a  warranty  of  au- 
thority, as  she  had  not  represented  herself  as  agent,  but 
had  merely  given  the  facts  on  which  T  had  exercised  his 
own  independent  judgment. 

§  158.  Liability  for  contracts  made  on  behalf  of  a  non- 
existent or  incompetent  principal.  If  an  agent  professes 
to  act  for  a  principal,  he  impliedly  warrants  the  princi- 
pal's competence  (13).  Thus  if  he  makes  a  contract  for 
a  principal  who  is  a  married  woman,  in  jurisdictions 
where  she  has  no  contractual  capacity,  so  that  the  third 
party  could  not  recover  from  the  principal,  the  third 
party  would  have  a  right  of  action  against  the  agent.  If 
he  made  a  contract  for  an  infant  where  an  infant's  ap- 
pointments of  agents  are  held  voidable,  and  the  infant 
disaffirms  the  contract,  the  agent  will  be  liable ;  but  the 
infant  must  actually  disaffirm  in  order  to  give  the  third 
party  a  right  of  action.  When  an  agent  professes  to 
have  authority  from  a  principal  who  is  in  fact  not  in  ex- 
istence at  the  time,  the  agent  becomes  personally  liable. 
This  has  been  illustrated  in  the  case  of  promoters  pro- 
fessing to  contract  on  behalf  of  a  corporation  not  yet 


(12)  Smout  V.  Ilbery,  10  M.  &  W.  1. 

(13)  Hoppe  V.  Saylor,  53  Mo.  App.  4. 


354  AGENCY 

organized  (14).  Another  illustration  is  furnished  by  the 
common  case  of  a  contract  made  by  an  agent  on  behalf 
of  an  unincorporated  association,  which  is  not  a  legal 
entity.  Thus  where  the  captain  of  a  company  of  volun- 
teers professed  to  contract  on  behalf  of  his  company  for 
a  rifle  fund,  he  was  held  personally  responsible,  as  the 
company  was  not  a  competent  principal  (15).  It  should, 
however,  be  noticed  that  if  he  had  ])rofessed  to  contract 
on  behalf  of  the  members  of  his  company,  and  not  for  the 
fictitious  principal,  the  company  itself,  he  would  not  have 
been  liable  if  in  fact  he  had  had  actual  authority  from 
the  members  (16). 

Section  3.    Contracts  for  Undisclosed  Principal. 

§  159.  Agent  is  liable  on  contracts  for  undisclosed 
principal.  Where  an  agent  makes  a  contract  for  an  un- 
disclosed principal,  whether  the  contract  is  oral  or  in 
writing,  he  is  liable  on  the  contract.  So  where  A,  who 
was  personally  well  known  to  T,  but  of  whose  business 
T  knew  nothing,  bought  cattle  from  T  in  his  own  name  but 
in  reality  for  a  meat  market  in  which  he  was  an  employee, 
T  was  allowed  to  recover  from  him  personally.  As  the 
court  said:  ''It  would  be  a  monstrous  principle  that 
a  person  buying  an  article  in  his  own  name  and  on  his 
own  credit  could  screen  himself  from  liability  for  pay- 
ment on  the  ground  that  he  had  bought  it  under  a  secret 
understanding  that  he  was  the  agent  of  a  bankrupt"  (17). 


(14)  See  discussion  of  Kelner  v.  Baxter,  §  22,  above. 

(15)  Blakely  v.  Bennecke,  59  Mo.  193. 

(16)  Pain  v.  Sample,  158  Pa.  428. 

(17)  Pierce  v.  Johnson,  34  Conn.  274. 


BETWEEN  AGENT  AND  THIRD  PARTY    355 

Even  if  the  agent  discloses  the  existence  but  not  the 
name  of  his  principal,  the  third  party  makes  the  contract 
in  reliance  on  him  personally.  It  does  not  matter  that 
after  the  contract  is  made  the  agent  discloses  his  princi- 
pal, or  even  that  the  third  party  first  sues  the  principal. 
He  retains  his  right  against  the  agent  until  he  has  pur- 
sued a  suit  to  final  judgment  (18).  If,  however,  at  the 
time  of  the  contract,  the  third  party  knows  who  the 
agent 's  principal  is,  no  matter  whether  he  got  the  infor- 
mation from  the  agent  or  from  some  other  source,  he 
does  not  rely  solely  on  the  agent's  credit,  and  the  agent 
is  not  liable  (19). 

§  160.  Agent's  liability  in  quasi  contract.  In  general 
the  agent  is  liable  in  quasi  contract  to  a  third  party  who 
has  paid  him  money  under  a  mistake  of  fact,  or  under 
duress,  or  induced  by  fraud,  or  on  a  consideration  which 
fails.  For  example,  T  had  paid  a  premium  on  his  policy 
to  A,  the  agent  of  the  company  in  which  he  was  insured. 
Before  A  paid  over  the  money  to  the  company,  or  aS' 
sumed  any  liability  on  account  of  it,  the  company  failed. 
T  was  allowed  to  recover  the  money  from  the  agent  (20). 
If,  however,  the  agent  has  disclosed  his  principal,  and  has 
in  good  faith  paid  the  money  received  from  the  third 
party  over  to  his  principal  before  notice  from  the  third 
party,  this  will  relieve  him  from  liability,  unless  he  has 
been  personally  guilty  of  fraud  or  duress.  To  illustrate : 
A  insured  a  ship  with  T,  telling  T  that  he  was  merely  an 


(18)  Cobb  V.  Knapp,  71  N.  Y.  348. 

(19)  Chase  v.  Debolt,  7  111.  371. 

(20)  Smith  v.  Binder,  75  111.  492. 


356  AGENCY 

agent.  The  ship  was  lost.  A  collected  on  the  policy  from 
T,  and  paid  it  over  in  good  faith  to  P,  just  before  T 
notified  him  not  to  do  so,  on  the  ground  that  it  had  been 
discovered  that  the  policy  was  voidable  for  a  concealment. 
A  was  held  not  liable  for  the  money  which  had  passed 
through  his  hands  (21).  But  if  A  had  secured  the  money 
through  his  own  fraud  or  duress,  or  if  he  had  not  dis- 
closed his  principal,  a  payment  over  to  the  principal 
would  not  relieve  him  from  liability  (22).  Again,  if  the 
agent  is  given  money  by  his  principal  to  pay  over  to  a 
third  party,  and  A  undertakes  to  the  third  party  to  pay 
him,  even  without  any  consideration  from  the  third  party 
for  his  promise,  if  later  the  agent  converts  the  money  to 
his  own  use  he  is  liable  to  the  third  party  in  an  action 
for  money  had  and  received  to  the  third  party 's  use. 


(21)  Holland  v.  Russell,  4  B.  &  S.  14. 

(22)  Larkin  v.  Hapgood,  56  Vt.  597;  Smith  v.  Kelly,  43  Mich.  390. 


CHAPTEE  XII. 

THIRD  PARTY'S  LIABILITY  TO  AGENT. 

§  161.  In  tort.  A  third  party  is  liable  to  an  agent  for 
any  actionable  wrong  done  liim  personally.  So  where 
A,  an  agent,  was  selling  a  certain  piano,  and  a  rival  agent, 
T,  published  a  libelous  advertisement  about  the  pianos 
A  was  selling  and  thus  injured  A  in  his  business,  A  was 
allowed  damages  in  a  suit  against  T  (1).  In  his  capacity 
as  agent,  the  commonest  injury  an  agent  suffers  is  inter- 
ference with  his  employment.  He  can  recover  against 
anyone  who  unjustifiably  procures  the  principal  to  dis- 
charge him,  even  though  he  is  an  agent  whose  employ- 
ment is  revocable  at  will.  S  was  an  employe  at  will  of 
the  M  company.  He  had  a  claim  on  account  of  injuries 
against  a  casualty  company,  in  which  the  M  company 
was  insured.  To  prevent  S's  having  funds  to  press  his 
claims,  T,  the  manager  of  the  casualty  company,  procured 
the  president  of  the  M  company  to  discharge  S.  Although 
the  M  company  had  a  right  so  to  discharge  S,  still  he  was 
able  to  recover  damages  from  T  for  his  unjustifiable  in- 
tervention (2).  The  third  party  is  also  liable  to  the 
agent  for  injury  to  any  property  of  the  principal  in  the 
agent's  possession,  or  any  to  which  he  is  as  agent  en- 
titled to  possession.    So  the  captain  of  a  canal  boat  owned 


(1) 

Weiss  V. 

Whittemore, 

28  Mich. 

366, 

(2) 

Gibson  v 

,  Casualty  Co. 

.,  232  111. 

49. 

Vol.  I- 

-28 

357 

358  AGENCY 

by  P  may  bring  trespass  against  a  third  party  for  cut- 
ting the  tow-rope  of  the  boat  (3). 

§  162.  In  contract:  In  general.  Since  the  agent  is 
merely  a  representative  of  the  principal  in  dealings  on 
the  principal's  behalf,  it  is  only  in  exceptional  cases  that 
he  himself  has  a  right  of  action  against  the  third  party 
on  the  contract  he  made  with  him.  But  he  has  in  some 
cases  a  right  to  the  exclusion  of  his  principal,  and  in 
some  cases  along  with  his  principal,  but  always  for  his 
principal's  benefit. 

§  163.  Agent  alone  can  sue  on  sealed  or  negotiable  in- 
strument made  in  agent's  name.  If  the  agent  makes  a 
contract  under  seal  in  his  own  name,  even  though  for 
a  principal  whom  he  discloses  at  the  time  of  the  contract, 
the  agent  alone  can  sue  on  the  contract  (4).  But  any 
defense  good  against  the  principal  will  be  good  against 
the  agent,  at  least  where  equitable  defenses  are  allowed. 
So  when  in  an  action  by  A  for  rent  on  an  indenture  of 
lease  made  between  A  and  T,  T  admitted  that  the  rent 
was  due,  but  set  up  as  a  defense  a  claim  against  A's 
principal,  for  whose  exclusive  use  and  benefit  A  was  suing, 
the  defense  was  held  good  (5).  Of  course  when  the 
agent  brings  the  suit,  any  defense  good  against  him  may 
be  set  up  against  him,  even  though  it  would  not  be  good 
against  the  principal.  For  example:  The  T  Insurance 
Co.  had  insured  a  ship  for  A  by  a  policy  under  seal.  A 
was  acting  for  P,  whose  name  did  not  appear  in  the 
policy.    The  T  Co.  had  agreed  with  A  that  A  should  take 


(3)  Moore  v.  Robinson,  2  B.  &  Ad.  817. 

(4)  Briggs  V.  Partridge,  64  N.  Y.  357. 

(5)  Bliss  V.  Sneath,  103  Cal.  43. 


BETWEEN  AGENT  AND  THIRD  PARTY    359 

the  credit  on  their  books,  in  place  of  money,  in  partial 
adjustment  of  a  loss  on  one  of  the  ships  A  had  insured  for 
P.  This  agreement  was  beyond  A's  authority,  and  A!, 
acting  under  P's  orders,  sued  for  the  actual  cash.  The 
court  held  that  although,  if  P  could  sue  in  his  own  name 
the  company's  defense  would  not  be  good  against  him, 
yet  when  A  sued  he  must  be  treated  in  all  respects  as 
the  real  party  in  the  cause.  *  *  The  plaintiff  cannot  be  per- 
mitted to  say  for  the  benefit  of  another  that  his  own  act 
is  void,  which  he  cannot  say  for  the  benefit  of  himself" 
(6).  If  the  agent  is  named  as  payee  of  the  negotiable 
instrument,  he  alone  can  sue  on  it;  and  if  he  has  not 
named  his  principal  in  the  writing  itself,  he  alone  can 
sue.  But  since  he  can  give  the  principal  the  right  to  sue 
in  his  own  name  by  endorsing  the  paper  over  to  him, 
the  technical  rule  is  unimportant. 

§  164.  Agent  as  well  as  principal  may  sue  when  princi- 
pal is  undisclosed.  When  an  agent  makes  a  contract  for 
an  undisclosed  principal,  the  third  party  binds  himself 
personally  to  the  agent,  and  so  the  agent  as  well  as  the 
principal  can  sue  on  the  contract.  Thus  where  A  sold 
bitumen  to  T  and  signed  a  memorandum  as  follows:  ''Sold 
for  account  of  A,  agent,  to  T,  4,000  cases  of  bitumen,"  it 
was  held  that  A  could  sue  on  the  contract  even  though  he 
had  described  himself  as  agent.  He  had  not  disclosed  a 
principal,  and  T  was  bound  to  him  personally  (7).  Of 
course  the  principal  has  a  right,  and  a  paramount  right,  to 
sue.     The  law  is  well  stated  in  Khoades  v.  Blackiston 


(6)  Gibson  v.  Winter,  5  B.  &  Ad.  96. 

(7)  Ludwig  V.  Gillespie,  105  N.  Y.  653. 


360  AGENCY 

(8):  ''It  is  a  well  established  rule  of  law,  that  when  a 
contract,  not  under  seal,  is  made  with  an  agent  in  his  own 
name  for  an  undisclosed  principal,  either  the  agent  or  the 
principal  may  sue  upon  it.  If  the  agent  sues  it  is  no 
ground  of  defense  that  the  beneficial  interest  is  in  another, 
or  that  the  plaintiff  when  he  recovers  will  be  bound  to  ac- 
count to  another The  agent's  right  is  of  course  sub- 
ordinate and  liable  to  the  control  of  the  principal,  to 
the  extent  of  his  interest.  He  may  supersede  it  by  suing 
in  his  own  name,  or  otherwise  suspend  or  extinguish  it, 
subject  only  to  the  special  right  or  lien  which  the  agent 
may  have  acquired." 

§  165.  Agent  as  well  as  principal  may  sue  on  a  written 
simple  contract  made  in  agent's  name.  AVhen  the  agent 
has  disclosed  his  principal  in  a  transaction  finally  em- 
bodied in  a  written  contract,  but  in  this  contract  the 
agent  has  failed  to  embody  the  principal's  name,  so  that 
in  the  instrument  the  obligation  of  the  third  party  runs 
to  the  agent  personally,  the  agent  may  sue  on  it,  even 
though  the  third  party  could  show  that  at  the  time  of 
the  contract  he  knew  that  the  agent  was  acting  for  an 
undisclosed  principal  (9).  A  settlement  with  the  prin- 
cipal would,  however,  be  a  good  defense  to  an  action  by 
the  agent  in  such  a  case  (10). 

§  166.  Agent  may  sue  in  his  own  behalf  where  he  has 
a  special  property.  Where  the  agent  has  some  vested 
interest  or  special  property  in  the  subject  matter  of  the 
agency,  he  may  sue  in  his  own  name  for  the  protection  of 


(8)  106  Mass.  334. 

(9)  Tustin  Fruit  Association  v.  Fruit  Co.,  53  Pac.  Rep.  693  (Cal.). 

(10)  Atkinson  v.  Cotesworth,  3  B.  &  C.  647. 


BETWEEN  AGENT  AND  THIRD  PARTY  361 

this  interest,  and,  at  least  so  far  as  this  interest  is  con- 
cerned, the  principal  cannot  control  the  suit.  Thus  in 
the  case  of  auctioneers  and  factors,  who  have  a  lien  on 
the  goods  delivered  to  them  by  their  principal  for  their 
commissions  and  charges,  the  right  to  sue  the  purchaser 
for  the  price  in  their  own  name  lies  in  the  agents,  and 
until  their  lien  is  satisfied  this  right  is  superior  to  the 
principal's  (11).  Wlien  the  agent  sues  a  third  party 
on  a  right  arising  out  of  his  agency,  he  may  recover 
the  full  measure  of  damages  for  the  infraction  (12).  To 
the  extent  of  his  own  interest  in  the  subject  matter  he  may 
himself  retain  the  amount  recovered.  The  balance  he 
holds  in  trust  for  his  principal. 

§  167.  Agent  may  sue  in  quasi  contract  in  cases  of 
mistake,  etc.  An  agent  may  have  paid  out  money  to  a 
third  party  under  circumstances  in  which  it  is  a  violation 
of  his  quasi-contractual  rights  for  the  third  party  to 
retain  it:  for  example,  he  may  have  paid  it  over  under 
a  mistake  of  fact,  or  owing  to  the  fraud  or  duress  of  the 
third  party.  Since  he  must  account  personally  to  the 
principal  for  the  moneys  he  receives  or  disburses  in  the 
course  of  his  agency,  he  can  recover  in  such  cases  in  his 
own  name  from  the  third  party.  Where  the  captain  of 
a  boat  was  compelled  by  a  customs  ofiBcer  to  pay  certain 
fees,  later  found  to  be  unlawfully  collected,  the  captain 
was  allowed  to  recover  in  his  own  name.  The  court 
said:  "Where  a  man  pays  money  by  his  agent  which 
ought  not  to  be  paid,  either  the  agent  or  the  principal 


(11)  Minturn  v.  Main,  7  N.  Y.  220. 

(12)  Treadwell  v.  Davis,  34  Cal.  601. 


362  AGENCY 

may  bring  an  action  to  recover  it  back"  (13).  But  an 
agent  cannot  recover  in  every  case  of  the  jjaymcnt  of 
money  under  a  mistake  of  fact.  For  a  mistake  as  to  which 
the  third  party  is  innocent,  without  fault  or  fraud,  and  tiie 
mistake  is  solely  the  agent's,  there  is  no  right  of  rwovery. 
So  where  A,  a  steamship  company's  agent,  agreed  with 
T  to  sell  him  two  tickets  to  Scotland  for  $:)3,  and  did 
so,  and  the  latter  discovered  that  he  should  have  charged 
$42  according  to  schedule  prices,  he  could  not  recover 
the  difference  from  T.  The  court  said:  "There  is  no 
claim  that  the  defendant  practiced  any  fraud  or  imposi- 
tion in  the  matter  of  purchasing  tickets.  He  acted  in 
entire  good  faith  and  paid  the  plaintiff  the  price  asked 
and  agreed  upon  at  the  time  of  the  purchase  and  sale. 
Why  then  should  he  be  compelled  to  make  good  the 
agent's  mistake  in  respect  to  the  price?  He  never  agreed 
to  pay  $42  for  a  ticket,  and  non  constat  that  he  would 
have  purchased  at  that  price"  (14). 


(13)  Little  V.  Fossett,  34  Me.  545. 

(14)  Hungerford  v.  Scott,  37  Wis.  341. 


APPENDIX  A 

QUESTIONS— CONTRACTS 

§  1.  What  is  the  difference  in  the  nature  of  the  right  that  a  man 
has  not  to  be  libelled,  and  his  right  to  recover  damages  from  some- 
one who  agrees  to  sell  him  some  bonds  and  then  refuses  to  do  so? 

§  2.    What  is  the  difference  in  the  legal  nature  of  a  cash  sale  and  a 

credit  sale? 

§4.  What  is  the  difference  in  the  origin  of  the  rights  of  the 
parties  where  Jones  pays  Brown  $500  believing  that  Brown  is  Coe  and 
where  Brown  give  Jones  his  note  for  $500? 

§8.  Arnold  says  to  Bates,  "I  will  give  you  $1,000  if  you  will 
marry  within  the  next  two  years."  Bates  does  so.  What  kind  of  a 
contract  is  this? 

§  13.  Gray  wrote  to  Stone,  *'I  will  sell  you  my  two  cylinder  run- 
about for  $450."  Stone  knew  that  Gray  recently  bought  two  autos, 
a  two  cylinder  and  a  six  cylinder,  and  thought  he  meant  the  former. 
In  fact,  what  Gray  meant  was  a  four  year  old  two  cylinder  car  that 
he  had  not  been  recently  using  and  of  which  Stone  knew  nothmg. 
May  Stone  hold  Gray  to  the  sale  of  the  new  runabout?  May  Gray 
compel  Stone  to  take  the  old  runabout? 

§14.  Wilson  sent  White  a  letter  as  follows:  "I  will  give  you 
$5,000  for  your  house  at  10th  and  X  streets,"  and  signed  his  name. 
Then  he  wrote  ''over"  at  the  bottom,  of  the  page  and  on  the  other 
side  added:  ''This  is  conditional  on  your  taking  my  place  at  a 
valuation  of  $2,500."  White  wanted  to  close  the  matter  up  in  a 
hurry,  so  he  simply  glanced  at  the  first  page  and  wrote  Wilson  that 
he  would  accept  his  offer.  May  White  refuse  to  take  Wilson's  house 
as  a  part  payment? 

§  17.  Jones  made  Smith  an  offer.  Smith  wrote  his  acceptance  and 
mailed  it.  Then  he  decided  to  call  it  off  and  telegraphed  Jones  to 
that  effect.  Jones  got  the  telegram  before  he  did  the  letter.  May  he 
hold  Smith  to  the  contract? 

§§19,  21.  Doe  said  to  Crane,  "I  will  sell  you  100  shares  of  XY 
stock  at'$50."  Crane  said,  "I'll  give  you  $45."  Doe  said  nothing, 
but  an  hour  later  sends  around  a  certificate  for  100  shares  and  a  bill 
for  $4,500.    May  heboid  Crane? 

363 


364  APPENDIX  A 

§22.  A  father  wrote  to  a  motor  company:  **If  you  want  to  sell 
my  son  a  car  I'll  see  that  you  are  paid  for  it  if  he  doesn't  pay  you." 
The  company  sold  the  son  the  car.  He  told  his  father  that  he  couldn't 
have  got  the  car  if  it  had  not  been  for  his  note.  The  company  said 
nothing  to  the  father,  but  later,  on  the  failure  of  the  son  to  pay, 
brought  suit  against  the  father.     May  they  hold  himt 

§§  24,  25.  A  patent  medicine  company  published  an  advertisement 
as  follows:  "We  will  pay  .$500  for  any  case  that  is  not  helped  by  our 
celebrated  specific."  Jones  took  their  medicine  and  was  not  helped. 
May  he  recover  the  $500  from  the  company? 

§  27.  Brown  and  Hill  exchanged  notes  providing  that  Brown 
would  sell  his  factory  and  business  for  $100,000,  "time  and  terms 
of  payment  and  method  of  transfer  to  be  arranged  later."  Later 
Brown  wished  to  withdraw.  May  he  do  so  without  rendering  him- 
self liable  to  an  action? 

§  31.  Arnold  said  to  Bates,  **For  the  next  3  days  I  will  sell  you 
my  regular  $30  stoves  for  $18  apiece."  Next  day  Bates  came  in  to 
buy,  but  just  as  he  entered  the  store  Aniold  said,  "I'll  have  to  call 
that  offer  of  yesterday  off."  May  Bates  hold  Arnold  to  his  original 
proposition  ? 

§  34.  Suppose  that  in  the  afternoon  of  the  day  the  offer  was  made 
Bates  had  been  told  by  Doe,  Arnold's  partner,  that  Arnold  had  de- 
cided not  to  sell  the  stoves  at  $18,  could  he  have  held  him? 

§36.  One  broker  said  to  another  on  the  corn  exchange,  "I'll  sell 
you  50,000  bushels  of  wheat  at  80  cents  a  bushel."  An  hour  later 
the  other  broker  came  back  and  said  he  would  take  the  offer.  Is 
there  a  contract? 

§38.  Dale  in  New  York  wired  White  in  San  Francisco:  "I  will 
give  you  the  position  of  superintendent  at  $10,000  a  year.  Come  on 
at  once  and  arrange  details."  White  came  on  at  once  at  consider- 
able expense,  but  when  he  reached  New  York,  Dale  was  dead.  May 
he  enforce  any  claim? 

§43.  Hall  said  to  Lewis:  "If  you  will  assign  to  me  for  three 
weeks  the  mortgage  that  Cornell  executed  to  you  2  years  ago  I  will 
give  you  $4,000  for  the  use  of  it."  Lewis  agreed  and  assigned  it. 
Hall  expected  by  threatening  to  foreclose  the  mortgage  to  compel 
Cornell  to  sell  the  land.  Unknown  to  Hall  the  mortgage  contained  a 
clause  providing  that  Cornell  could  have  5  years  more  on  it  if  he  de- 
sired, so  that  it  was  absolutely  useless  to  Hall.  May  Lewis  collect 
his  $4,000  from  Hall  ? 

§  46.  Todd  agreed  to  pay  Black  $1,000  if  Black  would  let  Todd 
vote  certain  stock  that  Black  owned  and  would  agree  not  to  sell  the 


CONTRACTS  365 

products  of  his  mill  for  less  than  a  certain  rate.  The  latter  agree- 
ment was  illegal.  Black  agreed  to  the  whole  offer.  May  Black  collect 
the  $1,000  from  Todd?  May  Todd  vote  Black's  stock  on  tendering  the 
$1,000? 

§  47.  On  what  theory  is  one  of  several  subscribers  to  a  fund  held 
to  the  payment  of  his  subscription? 

§  49.  Abbott  subscribed  for  a  set  of  Dickens '  works,  the  publisher 
agreeing  to  deliver  one  volume  a  month  and  Abbott  agreeing  to  pay 
the  price,  $25,  on  the  delivery  of  the  last  volume.  He  did  not  do  so 
and  finally  the  parties  signed  a  statement  that  "it  was  mutually 
agreed  that  Abbott  should  have  three  months  from  date  in  which  to 
complete  his  payments."  Three  weeks  later  the  publishers  sued  him 
for  the  $25.    Has  he  a  defense  to  the  suit? 

§  51.  Dole  was  a  night  watchman  in  a  factory  yard,  his  watch 
being  every  night  in  the  week.  An  adjacent  householder,  desirous  of 
having  some  one  about,  said  to  Dole:  "If  you  keep  up  your  duties 
faithfully  I  will  give  you  a  bonus  of  $10  a  month."  Dole  did  perform 
faithfully.     May  he  collect  the  bonus? 

§  52.  The  husband  of  a  murdered  woman,  being  extremely  anxious 
that  the  murderer  who  is  being  tried  shall  be  convicted,  says  to  the 
district  attorney  who  is  prosecuting  the  case:  "If  you  will  get  a 
conviction  in  this  case  I  will  pay  you  $500."  The  district  attorney 
gets  a  conviction.    Is  he  legally  entitled  to  the  $500? 

§  53.  Gray  had  a  claim  against  Todd  and  was  about  to  sue  on  it 
when  Todd  said  that  he  would  pay  him  $100  to  call  the  matter  square. 
Gray  agreed.  He  now  sues  to  get  the  $100  and  Todd  sets  up  that  the 
original  claim  was  invalid.    Is  this  a  defense? 

§  57.  The  owner  of  a  house  was  going  away  for  6  months  and 
asked  his  neighbor  to  go  over  the  premises  once  a  week,  air  them, 
see  that  they  were  kept  in  good  order,  etc.  The  neighbor  did  so. 
On  the  owner's  return  he  promised  to  pay  him  $50  for  his  trouble 
and  the  other  said  that  would  be  satisfactory.  Later  the  first  man 
refused  to  pay  the  $50  on  the  ground  that  his  promise  was  gratuitous. 
May  he  be  compelled  to  pay  it? 

§  59.  A  debtor  went  through  bankruptcy  and  secured  his  dis- 
charge. Later  he  voluntarily  promised  one  of  his  creditors  to  pay 
him  in  full.    May  the  creditor  hold  him  to  this  promise? 

§§  63,  65.  Angus  in  writing  agreed  to  pay  Dalton  $500  on  his 
wedding  day;  opposite  his  name  Angus  wrote  ^*seal"  and  made  a 
scrawl  with  the  pen.  There  being  no  consideration  may  he  be  held 
on  this  promise? 

§66.     Two  persons  signed  a  deed  whereby  they  agreed  the  one 


366  APPENDIX  A 

to  sell  and  the  other  to  buy  a  certain  piece  of  land.  A  week  later 
the  purchaser  met  the  seller  and  said  "Let's  call  that  off,"  to  which 
the  seller  agreed.    May  he  aftei-ward  hold  him? 

§  69.  White  hired  Marsh  to  work  for  him  for  a  year.  "White 
was  insane  at  the  time,  though  the  fact  was  not  known  to  Marsh. 
May  Marsh  hold  him  to  his  contract? 

§72.  Would  the  result  in  the  last  case  be  different  if  (1)  White 
had  an  insane  belief  that  a  certain  person  was  trying  to  kill  him 
but  was  otherwise  sane;  (2)  was  insane  at  intervals  but  lucid  at 
other  times'? 

§  73.    May  a  man  be  held  to  a  contract  made  while  intoxicated  I 

§  79.  An  executor  of  an  estate  bought  on  credit  some  flowers 
for  the  funeral.  His  promise  to  pay  for  them  was  not  in  writing. 
May  it  be  enforced  against  him? 

§  82.  Is  an  agreement  to  sell  standing  grain  one  that  is  covered 
by  the  statute  that  all  contracts  for  the  sale  of  any  interest  in  land 
must  be  in  writing? 

§  84.  In  consideration  of  a  promise  by  Barnes  to  repay  the  loan, 
Murphy  agreed  to  advance  Barnes  $50  a  month  until  Barnes*  in- 
come from  his  own  labors  reached  $100  a  month.  The  agreement 
was  not  in  writing.     May  it  be  enforced  against  Murphy? 

§§87,  88.  "For  value  received  we  promise  to  pay  William  White 
or  order,  $500  on  demand." 

(Signed)    Arthur  Brown. 
Charles  Darwin. 
Ernest  Fish. 

Suppose  White  releases  Brown  from  this  note  what  effect  will  it 
have  on  Darvvin  and  Fish? 

How  may  he  practically  release  Brown  without  releasing  the  other 
two? 

How  should  the  note  be  dmwn  so  that  he  may  hold  each  one 
separately  liable? 

§  89.  Suppose  Brown  dies,  may  White  sue  Brown's  executor  with 
Darwin  and  Fish? 

§  91.  Gray  and  Maine  made  a  contract  whereby  Gray  agreed 
within  six  months  to  appoint  Maine  as  his  sales  agent  in  a  certain 
town  or  else  to  make  him  assistant  superintendent  of  his  factory. 
When  the  six  months  were  up  Maine  wrote  saying  he  preferred  the 
agency.  Gray  wrote  back  that  he  could  not  have  that  but  could 
have  the  assistant  superintendentship.  May  Maine  maintain  an  ac- 
tion against  Gray  for  breach  of  contract? 


CONTRACTS  367 

§93.  A  father  whose  daughter  was  about  to  be  married  paid 
$100  to  a  jeweler  who  agreed  to  make  a  brooch  and  mail  it  to  the 
daughter.    He  refused  to  do  so.    May  the  daughter  sue? 

§94.  An  advertising  agency  agreed  with  a  manufacturer  to  run 
an  advertisement  for  him  for  three  months  in  a  certain  magazine. 
They  did  not  do  so.  May  the  magazine  sue  for  what  it  would  have 
made  on  the  advertising? 

§  96.  Lord  owed  Dale  $500.  Chase  agreed  with  Lord  to  pay  the 
debt  to  Dale.  Later  by  mutual  agTeement  between  Lord  and  Chase 
this  agreement  was  rescinded.     May  Dale  still  sue  on  it? 

§97.  If  Dale  sues  Chase  on  the  above  promise,  may  Chase  set 
up  the  defense  that  his  promise  was  induced  by  Lord's  fraudulent 
misrepresentation  ? 

§98.  Would  it  be  a  defense  for  Chase  to  the  action  by  Dale 
that  Dale  had  already  begun  suit  against  Lord  on  the  original  claim 
for  $500? 

§  103.  Can  an  action  for  breach  of  contract  to  marry  be  legally 
assigned  to  a  third  person? 

§109.  Bryan  had  a  claim  of  $500  against  Green  which  he  as- 
signed to  Fox.  Green  thereafter  paid  Bryan.  May  Fox  now  col- 
lect from  Green? 

§110.  Suppose  Brj-an,  after  assigning  his  claim  against  Green 
to  Dale  had  then  assigned  it  to  Low  and  Low  had  at  once  gone  to 
Green  and  showed  him  the  assignment  and  collected  the  claim. 
What  are  Dale's  rights  (1)  against  Green;  (2)  against  Low? 

§116.  What  is  the  function  of  a  court  in  constructing  a  con- 
tract? 

§  §  123  to  127.  Fort  agreed  to  pay  Hill  $1,000  for  an  auto  and 
Hill  in  return  promised  to  deliver  it  to  him  and  to  keep  it  in  re- 
pair for  one  year.  When  must  Fort  pay  his  $1,000;  on  delivery  or 
at  the  end  of  the  year  of  repairs? 

What  would  be  the  result  if  there  was  a  clause  in  the  contract 
that  Fort  was  to  try  the  auto  first  for  a  month? 

§128.  Suppose  the  contract  had  a  clause  that  the  auto  was  to 
b--  satisfactory  to  Fort  and  it  was  not  satisfactory  to  Fort,  but  he 
was  unreasonable.  Could  Hill  collect  the  price?  Suppose  Fort  told 
Hill  it  was  not  satisfactory  but  admitted  to  others  that  it  was. 
Could  Hill  collect? 

§130.  Thomas  agreed  to  sell  and  deliver  to  White  in  Chicago 
10,000  bushels  of  wheat  at  60  cents  a  bushel.  He  delivered  9,800 
bushels  and  White  refused  to  take  or  pay  for  them.  May  Thomas  re- 
cover on  the  contract  and  if  so,  how  much? 


368  APPENDIX  A 

§131.  Would  it  be  different,  if,  in  the  last  question  White  had 
agreed  to  pay  a  lump  sum  for  the  10,000  bushels? 

§§  132,  133.  Spates  contracted  to  deliver  100,000  bricks  to  Lyman 
in  installments  of  10,000  each  on  the  first  day  of  10  successive 
months,  each  installment  to  be  paid  for  as  delivered.  Spates  de- 
livered the  first  two  installments,  and  delivered  the  third  install- 
ment ten  days  late,  Lyman  refused  to  accept  it  and  called  the  con- 
tract off.     Is  he  justified  in  so  doing? 

§  140.  Gray  hired  Swift  as  a  gardner  for  a  year  at  $30  a  month. 
Later  they  agreed  that  Swift's  pay  should  be  $25  a  month.  It 
turns  out  that  at  the  time  Swift  made  the  second  contract  he  was  so 
intoxicated  that  he  did  not  know  what  he  was  doing.  May  he  still 
collect  $30  a  month  or  is  Gray  freed  from  all  liability  on  the  con- 
tract ? 

§147.  Parker  owed  White  $150  for  a  horse.  White  dunned 
him  and  Parker  gave  him  his  note  payable  30  days  from  date.  The 
note  is  not  paid.  May  White  sue  on  the  original  debt  or  only  on 
the  note? 

§149.  Suppose  in  the  last  case  Parker  sent  White  his  check 
for  $125  saying  that  it  was  for  pa>Tnent  in  full  and  White  cashed 
it.    Could  he  then  collect  the  other  $25? 

§154.  Murphy  is  playing  poker  and  Jones  loans  him  $100  to 
buy  chips.     May  Jones  compel  Murphy  to  repay  the  loan? 

§157.  A  liquor  dealer  sold  whiskey  to  a  druggist  who  was 
doing  business  in  a  no-license  town  and  to  help  the  druggist  in 
selling  it,  put  it  in  bottles  labelled  '*Root  Bitters."  May  he  collect 
from  the  druggist  the  price  of  the  liquor? 

§160.  The  proprietor  of  a  general  merchandise  store  in  a  coun- 
try town  sold  it  out  to  Yoe  and  agreed  not  to  open  a  similar  store 
anywhere  in  that  county  or  any  adjacent  eonnty.  Is  the  agreement 
binding? 

§166.  Smith,  wishing  to  annoy  Chase,  offered  Dale  to  pay  all 
his  expenses  and  give  him  $500  if  he  would  sue  Chase  for  libel. 
Dale  did  so.    May  he  collect  his  expenses  and  $500  from  Smith? 

§  169.  Allen  was  injured  by  a  railroad  company.  His  doctor 
advised  him  to  sue  and  Allen  said  he  would  give  him  $10  if  he  would 
pick  out  a  good  lawyer  and  get  him  to  bring  action.  The  doctor 
went  to  Smart,  a  lawyer,  and  offered  him  the  case  if  he  would  give 
him  (the  doctor)  $50,  to  which  the  lawyer  agreed.  The  patient 
found  this  out  and  refused  to  pay  the  doctor  the  $10.  Was  he 
justified  in  so  doing? 

§§172,  173.    An  automobile  manufacturer  hii-ed  Wright  to  run 


CONTRACTS  36d 

his  ear  in  a  race  and  offered  him  $1,000  if  he  won  the  race  and 
$1,500  if  he  also  succeeded  in  disabling  the  driver  of  a  rival  car. 
Wright  did  both.    May  he  recover  the  $1,500,  or  any  part  thereof? 

§178.  Suppose  in  the  above  ease  Wright's  mechanic  was  to  be 
paid  $25  for  the  race  and  during  it  Wright  told  him  to  do  something 
that  in  fact,  without  the  knowledge  of  the  mechanic,  contributed  to 
the  disabling  of  the  rival  driver.  May  the  mechanic  recover  the 
$25? 

§  185.  Nolan  contracted  to  drive  a  well  for  Evans  to  the  depth 
of  300  feet.  At  a  depth  of  150  feet  an  impassable  ledge  of  rock 
was  encountered.  May  Evans  recover  from  Nolan  for  breach  of 
contract  ? 

§  188.  Gould  contracted  to  raise  and  sell  to  Hale  1,000  bushels 
of  corn.  Before  the  corn  which  Gould  had  planted  was  ready  for 
harvesting,  it  was  wholly  destroyed  by  a  cyclone.  May  Hale  re- 
cover from  Gould  for  breach  of  contract? 

§  197.  John  Raymond  wrote  to  Siegel  asking  him  to  ship  him 
on  credit  certain  goods.  There  was  a  well  known  merchant  in  the 
town  by  the  name  of  John  Raymond  and  Siegel  thought  he  was  the 
one  who  had  written  the  letter  and  shipped  the  goods  in  that  be^ 
lief.  In  fact  it  was  another  man  by  the  same  name.  May  Siegel 
rescind  the  contract? 

§  200.  Fox  was  negotiating  for  a  typewriter  with  Pierce,  who 
told  him  that  the  margin  of  profit  was  smaller  on  that  machine 
than  on  any  other  in  the  market.  Such  was  not  the  case.  May  Fox 
rescind  the  contract  after  he  has  entered  into  it  ? 

§  203.  Suppose  Pierce  had  told  Fox  that  the  mere  fact  that  the 
company  made  the  machine  imposed  on  the  company  an  obligation 
to  keep  it  in  repair  for  two  years  after  sale  and  Fox  had  lelied  on 
that  statement  in  buying  the  machine,  could  he  rescind  the  contract 
on  discovering  its  falsity? 


APPENDIX  B 

QUESTIONS— QUASI-CONTRACTS 

§1.  What  is  the  difference  between  an  express  contract  and  an 
implied  contract? 

§  2.  What  is  the  difference  between  a  contract  implied  in  fact 
and   the  so-called  "contract   implied   in   law?" 

§  3.  Jones  goes  up  to  a  news-stand  antl  picks  up  and  keeps  a 
paper,  saying  nothing.  Is  his  obligation  to  pay  for  it  contractual 
or  quasi-contractual? 

§5.  Smith  breaks  Dodd's  window,  thereby  committing  a  tort 
against  Dodd  for  which  Dodd  sues  and  gets  a  judgment  for  $10. 
What  is   the  nature  of  Smith's  obligation   to  pay   the  $10? 

§  6.  A  statute  provides  that  the  school  physician  shall  vac- 
cinate every  child  attending  the  public  schools  and  may  charge  50 
cents  a  child  for  so  doing.  Is  his  right  to  recover  the  50  cents  con- 
tractual or  quasi-contractual? 

§10.  If  a  thief  stole  property  and  (1)  sold  it  for  more  than 
it  was  worth;  (2)  sold  it  for  less  than  it  was  worth,  what  would  be 
the  best  way  to  sue  him  in  each  case? 

§  11.  Finch  stole  a  horse  from  Dale  in  1900.  lie  kept  it  until 
1905  and  then  sold  it  to  Scott.  The  Statute  of  Limitations  provides 
that  all  actions  must  be  brought  within  7  years  from  the  time  they 
accrued.  Suppose  Dale  does  nothing  until  1908,  is  there  any  action 
that  he  can  then  bring? 

Suppose  the  Statute  of  Limitations  was  4  years,  could  he  bring 
any  action? 

§  12.  A  broker  stole  certain  bonds  belonging  to  Curtis  and 
sold  them  for  $10,000.  The  sale  was  originally  cash,  but  the  pur- 
chaser being  short  of  funds,  the  broker  took  his  note.  May  Curtis 
maintain  a  quasi-contractual  action  against  the  broker? 

§  §  13,  14,  15.  If  the  broker  in  the  above  case  had  simply  kept 
the  bonds  for  himself,  could  Curtis  have  maintained  a  quasi-con- 
tractual action  for  goods  sold  and  delivered? 

§  16,  Gould  took  Barnes '  horse  one  afternoon  and  so  badly  lamed 
him  that  he  was  worth  only  $50  where  before  he  had  been  worth  $100. 
A  horse  could  be  hired  for  the  afternoon  for  $3.  How  great  a  quasi- 
contractual  claim  has  Brown  against  Gould? 

§§18,  19.  Allen  watered  his  cattle  at  Ball's  spring  for  6  days. 
The  damage  to  the  soil  was  $5,  but  water  at  that  time  was  scarce 

370 


QUASI-CONTRACTS  371 

and  if  Allen  had  watered  elsewhere  he  would  have  had  to  pay  $5 
a  day,  and  to  drive  his  cattle  there  at  a  cost  of  $2f  a  day.  How 
much  may  Ball  recover  from  Allen  in  an  action  based  on  quasi- 
contract? 

§  23.  Henry  and  Martha  Jones  believe  that  they  are  legally  mar- 
ried when  in  fact  Henry  has  another  wife  living.  May  Martha  on 
separating  recover  the  value  of  her  services  as  housekeeper  I 

§  24.  White  falsely  represented  to  Todd,  a  wholesale  dealer,  that 
he  was  a  personal  friend  of  Todd's  brother  Charles  and  was  a 
large  retail  dealer.  In  consequence  of  these  misrepresentations,  Todd 
sold  goods  to  White  for  $100,  the  regular  price  of  which  was  $200. 
Immediately  after  the  sale  and  before  payment,  Todd  discovered  his 
mistake.  He  then  brought  an  action  against  White  for  goods  bar- 
gained and  sold,  and  claimed  $200.     May  he  get  it?     ^ 

§  25.  When  does  a  person  who  has  the  option  to  bring  an  action 
either  of  tort  or  assumpsit,  and  has  brought  one,  lose  the  right 
to  bring  the  other? 

§  28.  Hale  found  certain  property  belonging  to  Green.  The  lat- 
ter identified  it  and  Hale  told  him  he  could  have  it  back  on  paying 
the  costs  of  advertising.  Green  agreed  and  came  next  day  to  get 
the  goods,  when  Hale  demanded  $10  more.  Green  had  to  have  the 
iroods.  so  he  paid  it.     May  he  recover  the  amount  from  Hale? 

§  29.  Dale  was  about  to  leave  Chicago  to  take  a  boat  from  New 
York.  Barnes  had  a  groundless  claim  against  him,  but  had  him  ar- 
rested a  little  before  train  time  on  the  ground  that  he  was  an  ab- 
sconding debtor.  Dale  paid  the  money  to  get  away.  May  he  re- 
cover ? 

§  30.  Suppose  in  the  last  ease  a  hurried  judgment  had  been  ob- 
tained by  Barnes  against  Dale  and  Dale  had  paid  that  judgment, 
could  he  have  recovered  the  money  so  paid? 

§34.  Alphonse,  Jones'  chauffeur,  was  speeding  in  violation  of 
Jones'  orders.  While  so  doing  he  injured  Young,  who  sued  Jones 
and  recovered  from  him.    May  Jones  recover  from  the  chauffeur? 

§35.  Dill  took  out  a  fire  insurance  policy  of  $5,000  in  the  X 
Company  and  another  for  the  same  amount  in  the  Y  Company.  He 
had  a  $3,000  loss  and  recovered  the  whole  amount  from  the  X  Com- 
pany. May  the  X  Company  recover  $1,500  from  the  Y  Company? 
§37.  White's  house  caught  fire  while  he  was  away.  Frear,  his 
neighbor,  fearin-  that  the  fire  would  entirely  destroy  the  house,  put 
it  out  as  an  act  of  kindness.     May  he  recover  from  White  for  his 


services 


» 


§  39.    Lord  makes  a  mistake  as  to  the  boundary  between  his  land 
and  his  neighbor's  and  builds  a  chicken  coop  on  his  neighbor's  land. 


372  iUTENDIX  B 

When  ejected   from  the  land   may   he  recover  for  the   value  of  the 
improvement  I 

§42.  Fales  executed  a  note  to  Hill  to  pay  $500  "with  legal  in- 
terest." Both  thought  the  legal  rate  of  interest  was  8  per  cent,  and 
Tales  paid  on  that  basis;  in  fact  it  was  6  per  cent.  May  Fales 
recover  the  difference? 

§  44.  Thayer  agieed  to  deliver  1,000  pounds  of  ice  a  day  to 
Gould's  restaurant  at  the  rate  of  $2.50  a  day.  Thayer  later  got 
the  erroneous  idea  that  he  had  a^'reed  to  deliver  1.200  pounds  and  did 
80,  charging  $2.50  a  day.  May  he.  on  discovering  his  mistake,  ro- 
cover  the  difference f 

§49.  An  author  agreed  to  f\iniish  an  editor  with  3  short  Moms, 
a  long  story  and  4  poems  for  $1,000.  After  furnishing  one  short 
story  and  a  poem  he  died.  May  his  executor  recover  iu  quasi-con* 
tract  for  the   contributions  furnished? 

§  50.  Suppose  in  the  last  case  the  contract  was  oral  and  was  one 
that  was  not  to  be  performed  within  a  year  and  so  within  the  statutes 
of  Frauds.  If  the  author  had  simply  refused  to  complete  his  con- 
tract after  performing  part,  could  he  have  recovered  in  quasi-con- 
tract for  what  he  had  done? 

§52.  Abbot  agreed  to  buy  Scott's  store  and  stock  for  $10,000 
and  paid  him  for  it.  Scott  then  refused  to  complete  the  sale  and 
sold  it  to  Chase  for  $8,000.  The  store  and  stock  were  not  worth 
over  $7,500.  How  much  may  Abbot  recover  from  Scott  and  in 
what  form  of  action? 

§  53.  An  opera  singer  agreed  to  sing  for  Hill  two  years  for  $5,000 
and  Hill  gave  him  an  advance  of  $1,500.  Before  the  time  began  the 
singer's  throat  was  paralyzed  so  that  he  could  not  carry  out  the 
contract.     May  Hill  recover  the  $1,500? 

§  54.  Suppose  in  the  last  case  the  singer  had  duly  completed  his 
contract  and  then  sought  to  recover  from  Hill  the  balance  of  $3,500 
and  Hill  had  set  up  the  statute  of  Frauds,  What  remedy  would 
the  singer  have? 

§  55.  Ray  agreed  to  sell  his  factory  to  a  trust  in  violation  of  a 
statute  forbidding  such  sales.  He  was  paid  $1,000  on  account  and 
then  refused  to  turn  over  the  property.  May  the  purchaser  recover 
the  $1,000? 

§  58.  A  wife  goes  to  a  store  and  orders  a  barrel  of  flour,  a  dress 
and  a  diamond  bracelet  and  has  them  charged  to  her  husband.  Un- 
der what  circumstances  would  he  be  liable  in  each  case  for  (1)  the 
agreed  on  price,  (2)  the  reasonable  value  of  the  articles? 


APPENDIX  C 

QUESTIONS— AGENCY 

§  2.  What  is  the  difference  between  the  relation  of  principal  and 
agent,  and  master  and  servant  ? 

§  5.    May  a  person  legally  appoint  an  agent  to  kill  a  third  person 

for  him? 

§8.  Payne,  an  infant,  gave  Allen  a  power  of  attorney  to  seU 
Payne's  land.  Allen,  in  accordance  with  the  terms  of  the  power 
of  attorney,  agrees  to  sell  it  to  Todd.  Payne  subsequently  refuses 
to  convey  the  land  to  Todd.    'May  Todd  sue  Payne? 

§  13.  Ray,  Jones  and  Smith  and  30  others  organized  an  informal 
shooting  club,  called  the  South  Shore  Gun  Club.  They  held  a  meet- 
ing at  which  two-thirds  of  the  members  were  present  and  by  a  ma- 
jority but  not  unanimous  vote,  authorized  Ray  to  buy  300  decoys. 
He  did  so.  Subsequently  the  seller  sued  the  club  for  the  price  of 
the  decoys.    What  members  of  the  club  are  liable^ 

§  19.  Hale  wanted  to  buy  an  auto.  Jones,  his  friend,  heard  of 
one  for  sale  by  Lane.  He  went  to  Lane  and  said  he  wanted  an 
option  on  it  for  Hale.  Lane  said  he  could  have  an  option  till  12 
o'clock.  Jones  could  not  find  Hale  to  get  his  authorization,  but  at 
12  he  telephoned  Lane  that  Hale  would  take  it.  At  3  that  afternoon 
Jones  saw  Hale  and  told  him  what  he  had  done  and  Hale  ratified  it. 
May  Hale  enforce  the  contract  of  sale  against  Lane? 

§  26.  In  the  above  case,  if  Lane  had  found  out  at  12 :30  that  Hale 
had  not  really  authorized  Jones  to  buy  the  auto,  could  he  have  re- 
scinded the  contract  by  notifying  Jones? 

§  31.  Lord  and  Dall  were  in  the  office  of  Fales.  Dall  was  trying 
to  borrow  $1,000  from  Fales  and  said  to  him,  '^ord  has  authorized 
me  to  pledge  his  stock  to  secure  the  loan."  Lord  said  nothing  and 
Fales  advanced  the  money  to  Dall.  May  Fales  compel  Lord  to 
pledge  the  stock? 

§34.  White  rang  up  Todd  on  the  'phone  and  told  him  to  go 
down  to  Dale's  office  and  there  sign  a  deed  for  White.  Todd  did 
so     Does  the  signature  bind  White? 

§  40.  Luce  appointed  Field  his  agent  to  sell  a  patented  article 
.vithin  a  certain  district.  He  subsequently  also  appointed  Barnes 
his  agent  for  the  same  purpose  in  the  same  district.  Has  Field  any 
cause  of  action  against  Luce? 

8  44.    Green  Usted  his  house  for  sale  in  Olsen's  real  estate  agency. 

373 

Vol  1—29 


S74  APPENDIX  C 

Shortly  thereafter  Green  died,  but  Olsen  was  not  notified  of  this 
fact  and  later  sold  the  place  to  Young.  What  are  Young's  rights 
and  against  whom? 

§45.  Suppose  Green  had  niamcd  after  listing  the  house  with 
Olsen.    Would  that  have  atrectcii  Olsen 's  power? 

§  47.  Suppose  that  Green  had  been  indebted  to  Olsen  in  $5,000 
for  money  advanced  by  Olson  to  buy  the  house  and  that  Green  had 
listed  the  house  with  Olsen  to  sell  it  and  to  get  back  his  .$o,U00. 
What  would  have  been  the  effect  of  Green's  death  on  Olsen 's  power? 

§48.  Fales  appointed  Dart  his  agent  for  ten  years  to  attend  to 
the  leasing  of  a  house  of  Fales.  After  three  years  the  house  was 
coiidemiK'd  by  a  railroad  and  torn  down  to  make  room  for  a  station. 
Dart  had  been  making  $50  a  year  in  commissions.  What  are  his 
rights  against  Fales? 

§  49.  Penn  wrote  to  Allen  and  told  him  to  buy  some  goods  for 
Penn  and  have  them  shipped  to  him.  Allen  gave  tlie  wroui,'  sliipi<ing 
directions  and  was  put  to  considerable  expense  on  that  account 
before  the  goods  tinally  reached  Penn,  May  he  recover  from  Penn 
for  these  expenses? 

§  54.  An  employee  works  in  a  factory  cutting  glass  and  his 
lungs  are  gradually  injured  by  the  dust  from  the  ground  glass. 
May  he  recover  for  this  injury  from  the  employer? 

May  he  do  so  if  it  can  be  shown  that  there  is  a  suction  apparatus 
on  the  market  that  can  be  bought  for  a  reasonable  sum  and  fitted 
over  the  grinding  wheel  so  as  to  draw  the  dust  away  from  the  work- 
man? 

What  would  be  his  rights  if  the  master  had  supplied  such  a  suc- 
tion apparatus,  but  the  employee  had  not  used  it  because  he  thought 
it  interfered  with  his  work? 

§55.  Suppose  a  belt  in  a  factory  wore  through  and  tore  off  and 
killed  a  workman,  would  the  employer  be  liable  (1)  if  he  had  been 
told  of  the  fact  and  had  not  supplied  a  new  belt;  (2)  if  he  had 
kept  a  supply  of  belts  on  hand  and  told  the  workman  to  put  on  a 
new  one  whenever  the  old  ones  wore  out  ? 

§  60.  An  employer  hired  a  superintendent,  being  careful  to  choose 
a  man  of  good  reputation.  The  superintendent  became  intoxicated 
and  allowed  some  defective  machinery  to  be  installed,  as  a  result 
of  which  an  employee  was  killed.    Is  the  employer  liable  ? 

§  63.  An  apprentice  on  his  first  day  of  work  was  set  to  work 
on  a  defective  machine  which  injured  him.  Had  he  assumed  the 
risk  so  as  to  exonerate  the  employer? 

§  65.     White  and  Yotmg  are  working  together  pitching  hay  on  a 


AGENCY  375 

wagon,  both  being  emplo5'ed  by  Doane.  White  is  injured  by  Young's 
negligence.    May  White  recover  from  Doane  f 

§67.  Suppose  in  the  last  case  White  had  been  injured  because 
Young's  pitchfork  was  defective  and  Young  had  had  the  duty  of 
picking  out  and  allotting  the  pitchforks  to  the  men  every  morning. 
Would  White  have  a  cause  of  action  against  Doane? 

§  69.  Would  a  telephone  exchange  operator  be  able  to  recover 
against  the  telephone  company  if  he  were  injured  by  a  shock  caused 
by  the  negligence  of  a  lineman  in  insulating  some  feed  wires  in  the 
dynamo  room? 

§  72.  Lear  was  an  employee  of  a  steamship  company  and  was 
employed  in  unloading  a  vessel.  He  was  injured  by  the  negligence 
of  a  gang  of  painters  who  were  also  employed  by  the  company  in 
painting  the  vessel.  Is  Lear  barred  by  the  fellow  servant  rule  from 
recovery  against  the  company? 

§  75.  Gray  on  the  way  to  town  was  asked  by  Luce  to  buy  some 
medicine  for  Luce's  wife.  Gray  said  he  would,  but  did  not  do  so. 
Is  he  liable  to  Luce? 

§  84.  Scott  hired  Thorpe  as  his  lawyer  to  attend  to  a  collection. 
Thorpe  was  busy  and  turned  the  case  over  to  Coke,  another  law- 
yer.   Has  Scott  a  cause  of  action  against  Thoi-pe? 

§  85.  Suppose  that  Thorpe  had  attended  to  the  collection  of  the 
claim  himself  and  when  the  matter  had  been  adjusted  had  sent  his 
office  boy  to  deliver  the  receipted  bill  to  the  debtor.  Would  this  be 
a  violation  of  his  duty  as  agent? 

§91.  Hicks,  a  clerk  in  Field's  store,  saw  a  sneak  thief  escaping 
with  some  goods  and  ran  after  him  to  arrest  him.  Finding  that  he 
could  not  catch  him  he  threw  a  stone  to  disable  him,  which  hit  Todd, 
a  passerby,  and  put  out  his  eye.  Is  Field  responsible  for  the  injury 
to  Todd  ? 

§  92.  Suppose  the  clerk  in  the  last  case  got  into  an  altercation 
with  a  customer  and  to  compel  him  to  pay  had  knocked  him  down 
and  beaten  him.  Would  Field  be  liable  to  the  customer  for  the 
assault? 

§  93.  Suppose  this  clerk  was  particularly  anxious  to  make  the 
sale  in  order  to  win  a  prize  given  to  the  clerk  making  the  largest 
number  of  sales  and  for  that  reason  assaulted  the  customer  as 
mentioned  before.     Would  Field  be  liable? 

§  97.  Dill,  a  clerk  of  the  XY  Company,  who  had  charge  of  the 
certificates  of  stock,  duly  signed,  and  which  required  only  to  be 
filled  out,  fraudulently  issued  one  for  100  shares  to  White,  who  sold 
it  to  Scott,  who  bought  it  in  good  faith,  White  and  Dill  keeping  the 


376  APPENDIX  C 

money.    Is  Scott's  redress  against  the  company  or  only  ajrainst  Dill! 

§99.  Cox  hires  a  well-digpng:  company  to  drill  a  well  for  him; 
during  the  drilling  the  drill  is  broken  by  the  negligence  of  the  oper- 
ator and  Yates  is  injured.     May  Yates  hold  Coxf 

§100.  A  committee  of  Dill,  drny  and  Adams  were  gathering 
flowers  for  a  church  festival.  Murphy  lent  his  automobile  and  chauf- 
feur to  Dill  for  the  day.  While  bringing  the  flowers  to  the  church 
the  chauffeur  nesjlisjently  ran  down  and  injured  Thayer.  Who  is 
responsible  therefor,  Dill  or  Murphy? 

§  104.  A  statute  forbids,  under  penalty  of  fine,  the  sale  of 
adulterated  milk.  A  servant  of  a  milkman  sells  milk  that  is  adul- 
terated.    Is    the   milkman    responsible t 

§  110.  Hanks  owns  a  flat  buildin«.i  in  Cliicago  and  puts  it  in  the 
hands  of  Allen,  a  real  estate  agent.  It  is  the  usual  course  of  business 
to  repair  the  flat  for  the  tenant,  but  Hanks  told  Allen  not  to  do  so. 
Allen  leased  a  flat  to  a  tenant  and  agreed  to  repair  it  for  him.  Is 
Hanks  bound  by  this  a'jreementf 

§  113.  Has  a  general  sales  agent  power  to  takes  notes  in  pay- 
ment T 

Has  a  real  estate  agent  the  power  to  give  a  warranty  deed? 

§114.  Has  a  purchasing  agent  power  to  buy  on  credit?  Has  he 
power  to  agree  that  the  goods  shall  be  shipped  by  some  particular 
route? 

§  116.  Has  a  factor  power  to  pledge  goods  entrusted  to  him  for 
sale? 

§  117.  What  is  the  difference  in  the  powers  of  a  factor  and  a 
broker? 

§119.  Has  an  attorney  at  law  power  to  let  his  client's  case  stand 
over  to  the  next  term  of  court? 

§  120.  Yates  had  for  several  years  acted  as  the  agent  of  a  com- 
pany selling  farm  machinery  and  had  sold  several  pieces  of  machinei-y 
to  Tidd,  sometimes  taking  cash  and  sometimes  Tidd's  note.  The 
company  finally  sent  out  instructions  to  all  agents  to  sell  only  for  ccsh. 
Thereafter  Yates  sold  Tidd  a  cultivator  and  took  his  note.  The 
company  demanded  either  cash  or  a  return  of  the  cultivator.  May 
they  compel  Tidd  to  do  the  one  or  the  other? 

§  122.  Suppose  in  the  last  case  that  Yates  had  told  Tidd  he  was 
authorized  on  behalf  of  the  company  to  buy  a  horse  that  Tidd  had 
and  offered  bim  .$150  therefor,  which  Tidd  accepted,  believing  that 
Yates  had  the  power  so  to  do.  Could  Tidd  hold  the  company  on 
this  contract? 

§  123.     Suppose  that  in  the  last  ease  the  company  had  given  Yates 


AGENCY  377 

several  blank  checks  duly  signed  by  th^  company  with  which  xo 
pay  his  travelling  expenses  and  he  had  filled  out  one  of  these  and 
given  it  to  Tidd  for  the  horse.  Could  Tidd  collect  it  against  the 
company  ? 

§  125.  Fales  was  running  a  roller-skating  rink  in  his  own  name, 
bu^  really  as  an  agent  of  Olsen.  Olsen  had  instructed  him  to  spend 
no  money  except  what  was  necessary  for  the  purchase  of  roller 
skates.  Fales  hired  Murphy  as  janitor  of  the  rink.  Fales  later 
absconded  without  paying  Murphy,  who  on  discovering  Olsen 's  con- 
nection with  the  rink  sued  him  for  his  wages.    May  he  recover? 

§  126.  Suppose  in  the  last  case  that  Fales  had  given  Murphy  a 
note  for  $150  signed  by  Fales  in  his  own  name,  could  Murphy  recover 
from  Olsen  on  that  note? 

§  127.  Brown  bought  land  from  French,  nominally  for  himself, 
really  for  Lord,  who  was  not  mentioned.  Lord  gave  the  purchase 
price  to  Brown,  who  did  not  pay  French.  Thereafter  French  dis- 
covered that  Lord  was  really  the  purchaser  and  sued  him  for  the 
price.    May  he  recover  from  Lordt 

§  128.  Suppose  French,  in  the  last  case,  had  first  tried  to  col- 
lect by  suing  Brown;  could  he  thereafter,  when  he  discovered  Lord's 
connection  with  the  case,  dismiss  the  suit  against  Brown  and  bring 
suit  against  Lord? 

Could  he  do  so  if  he  had  already  known  of  Lord's  connection 
before  bringing  his  suit  against  Brown  ? 

§131.  An  automobile  driven  by  William,  Payne's  chauffeur,  ran 
into  Holt.  Just  as  the  auto  stopped  William  said:  '*!  struck  him 
because  the  brake  was  out  of  order  and  wouldn't  work  properly." 
Can  this  statement  be  used  as  an  admission  against  Payne  in  an 
action  by  Holt  for  injury  caused  by  the  collision? 

§  133.  Hicks  was  the  meter  inspector  of  a  gas  and  electric  com- 
pany. He  was  reading  the  meter  in  Soule's  house  when  Soule  said 
to  him:  "The  electric  lights  in  my  ofliee  downtown  aren't  work- 
ing and  I  sha'nt  pay  for  the  rental  of  them  until  they  are  put  in 
repair."    Is  this  suflBcient  notice  to  bind  the  company? 

§  140.  White,  a  brewer,  put  Maine  in  charge  of  a  saloon.  Maine 
sold  the  glassware,  cash  register,  etc.,  to  Hull,  who  thought  that 
Maine  was  the  owner  and  paid  him  cash  therefor.  May  Hull  re- 
tain the  property  as  against  White? 

§141.  Finch  sent  Cox  to  buy  a  piece  of  land  from  Young. 
Thomas,  who  wanted  to  secure  the  land  for  himself,  kidnapped  Cox 
and  detained  him  until  he  (Thomas)  got  the  land  from  Young.  Haa 
Fineh  a  cause  of  action  against  Thomas  ? 


378  APPENDIX  C 

§  143.  Fox  and  White  made  a  contract  in  writinj?  whereby  White 
agreed  to  sell  Fox  a  certain  piece  of  land.  The  contract  was  signed 
by  White  and  Fcx.  May  Lynch,  Fox's  principal,  sue  upon  the  con- 
tract in  his  own  name  if  Fox  during  the  negotiations  had  told  White 
that  he  was  actinor  for  another? 

§  148.  Would  it  make  any  difference  in  the  last  ease  if  the  agent 
had  expressly  stated  in  the  contract  that  he  was  acting  on  his  own 
behalf  and  not  as  agent  f 

§  152.  Peters  had  a  store  in  Cliicago  and  had  agents  in  various 
country  towns  to  solicit  and  forward  ordej*s  to  him.  Tidd  asked 
Abbot,  one  of  these  agents,  to  send  in  an  order  for  certain  articles 
that  Peters  controlled  the  sale  of.  Abbot  refused  to  do  so,  causing 
Tidd  serious  loss.    Has  Tidd  a  right  of  action  against  Abbot  f 

§153.  Thayer,  the  owner  of  a  paper,  ordered  Allen,  the  editor,  to 
insert  a  libelous  statement  about  White.  Allen  did  so.  May  White 
sue  Allen  for  the  libel? 

§155.     Marx  and  Fales  signed  the  following  instrument: 

"Fales  agrees  to  sell  and  Marx  to  buy  10,000  bushels  of  wheat 
at  60  cents  a  bushel. 

(Signed)  "ALBERT  FALES, 

"GEORGE  MARX,  Agent." 

May  Fales  hold  Marx  on  this  contract  if  it  appears  that  Marx 
was  really  acting  for  Houston  as  principal? 

§157.  Lynch  said  to  Mott:  "Gay  has  asked  me  to  buy  for  him 
a  perfectly  sound  horse.  I  can  see  that  your  horse  is  not  sound,  but 
I  think  he'll  do  and  I  will  take  him  for  Gay,"  and  they  made  the 
sale  at  $150.  Gay  refused  to  take  the  horse.  Has  Mott  a  cause  of 
action  against  Lj'nch? 

§  158.  Yoe  agreed  to  buy  from  Luce  1,000  acres  of  land  for  the 
Redlands  Improvement  Corporation  as  purchaser,  Yoe  stating  that 
he  was  only  an  agent.  There  was  no  such  corporation.  May  Luce 
hold  Yoe? 

§159.  Lane  goes  to  White  and  says,  "I  will  give  you  $5,000  for 
your  land.  You  understand  I  am  not  acting  for  myself,  but  for  a  prin- 
cipal, although  I  am  not  at  liberty  to  give  his  name."  White  ac- 
cepts the  offer.  May  he  hold  Lane  personally  liable  on  the  con- 
tract ? 

May  he  do  so  if  he  found  out  from  another  source  that  Lane 
was  really  acting  for  Peterson  ? 

§  164.  On  the  facts  stated  in  the  last  question,  if  White  refuses 
to  carry  out  the  contract,  may  Lane  maintain  an  action  against 
him? 


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